Not much has changed in the past two weeks since my last post. The market has continued to seem to defy gravity. For more than a month now, I have expected the market to decline on an intermediate basis. I want to point out though that there has been no change in the overall strategy to remain in a holding pattern on already held positions since 2/13/2012. I have simply been looking for a significant drop in the market to indicate a possible good opportunity to add to held positions. Previous analysis of the likely short term market decline is based on the trend of the intermediate sentiment (blue line chart 1 below). However, as one can see, the slope of the intermediate sentiment line decreased and has taken much longer to cross zero than previously expected. The slope of the intermediate sentiment line remains negative and is very likely to cross zero very soon. This may result in a short term drop in the market. The slope of the long term sentiment signal (green line chart 1 below) remains positive and indicates that the market prices shall continue to remain buoyant on a long term basis. The expected trading range next week (Chart 2 below) is between 1357 and 1460. A drop below 1357 would indicate a significant decline and could be a good buy opportunity.
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| Chart 1: S&P 500 03/30/2012 Sentiment Signal (click to expand). |
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| Chart 2: S&P 500 Weekly Expected Trading Range (click to expand). |
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