Let’s look at history.  In early March of ’03 after the crash of 2000-02, the S&P 500 turned up for a five year bull move (after having made an absolute bottom in October of ‘02).

On the weekly chart in October of ’02 with the S&P at 770 both MACD and RSI gave bullish divergence signals.  Fast Stochastic was oversold.  In two short months the S&P shot up to 950.  Then over three months the average fell back to 790 testing the low.  Both MACD and RSI again gave bullish divergence and fast Stochastic was again oversold.  From there the average nearly doubled in a little over four years.

The picture today is very similar to conditions of Oct-Dec ’02.  Two months ago the S&P dropped to 670.  A few days later MACD and RSI gave bullish divergence signals, and fast Stochastic was oversold.  Then came the big rally which has now taken us to 875.

Six years ago on the monthly chart the bullish divergence signals did not occur until the retest of the lows in March of ‘03.  Likewise this time around, we have yet to see bullish divergence from either RSI or MACD.

If history repeats (and I am not smart enough to to know if it will), we could see the market drift lower over the next several months to test the March lows.  And then if MACD and RSI are still diverging, we would have the foundation to see a real bull market.

Worth watching.

Click here for two possible EW scenarios.  The bullish scenario called for a retest of Mar low in May/Jun, whereas the bearish scenario forecasts a bottom by end 2009/early 2010.  I’ve no idea since I don’t follow S&P 500 closely.  Still holding an one-stock portfolio.

An interesting article on this.

http://upsidedowncharts.com/2009/04/29/can-sp-breakthrough-major-resistance-level/

Some observers here on AFB measure the secular bear market from September of 2000.  But the current leg of the bear can reasonably be measured from January of 2008 when we broke below 1400 on the S&P500;.  Since then the S&P has not closed above its 200-day Moving Average.  It threatened to do so on May 19, 2008 when it closed at 1427.  But since then ..... well we all know what has happened since then.

At Friday’s close of 929, the 200MA at 954 is in easy striking distance.  Will we bounce off it again?  Will we cut through to the upside?  The signals on the daily chart seem mixed with RSI positive and MACD negative.  The weekly chart looks a lot like last year’s did.  Also worthy of note is resistance in the 930-940 range.  And market leaders (like AAPL) seem to have lost some steam this week.  Do not AAPL technicals look a bit like last May.

Finally, both VIX and VXN have been trending downward, but both are showing signs of a possible reversal.  I watch the VXN more these days because it is not influenced by the options on financial stocks.

I don’t pretend to know what will happen, and I am not a trader.  But I continue taking a little off.  Mostly call writing but some outright sales.

Mid-morning we are at 918 with the 200 day MA now down to 940.  This is getting interesting.

Technicians are watching 200 MA, 940, 20-day EMA and 890.  Breaking below 20-day EMA/890, likely to retest Mar lows.  Above 200 MA/940, bull market confirmed.

I normally find driving using the REARVIEW MIRROR, leads to much confusion.

{....I really prefer chicken entrails…..}

Personally, I like chicken entrails myself.  Anyone using anything else, or attempting to use history, to predict this market is smoking a dube.  With government spending and printing dollars out of control, only one thing is for certain… inflation. It’s coming. It’s no time to have your money in CD’s, a bank, or your mattress.  I view holding stock long in companies like Apple that continue to make a profit, and that are selling worldwide, the safest way to keep up with inflation when it hits. As the dollar gets cheaper we will have long lines of foreigners at the NY Apple Store buying iPhones allowing Apple to continue to turn nice profits.

artman1033 - 23 May 2009 11:38 AM

“As the dollar gets cheaper ” APPLE will have to pay more for the components and assembly made in China.

No question!  But with Apple proven long term volume contracting smarts for both assembly and parts, plus their high profit margins, I don’t think they will be as negatively affected as Pre and others will be.  I can’t see if off setting the devalued dollar and the increased foreign sales because of it.

TanToday - 22 May 2009 12:42 AM

I normally find driving using the REARVIEW MIRROR, leads to much confusion.

{....I really prefer chicken entrails…..}

That has been somewhat said before, “No man having put his hand to the plow and looking back is fit for the Kingdom of God.” Luke 9:62  

artman1033 - 23 May 2009 11:38 AM

“As the dollar gets cheaper ” APPLE will have to pay more for the components and assembly made in China.

True, but exchange rates and prices are all relative. For example, folks shopping via Amazon to dodge sales taxes. Further, for items purchased in $$, all will be affected. Apple, due to their long term agreements and bulk purchasing, will still have an advantage.

ldrhawke - 23 May 2009 11:32 AM

Personally, I like chicken entrails myself.  Anyone using anything else, or attempting to use history, to predict this market is smoking a dube ...

Everybody and every discipline use history to predict the future.  Name me one that doesn’t.

On the Free Trading Videos. Com website, dseven’s Memorial Day Weekend video gives a couple of possibilities for the market. 

Is the top in?

Afraid to trade hinted that top is in.

Mace - 22 June 2009 02:15 PM

Is the top in?

Afraid to trade hinted that top is in.

I guess you have sold your calls then Mace.

litespeed - 22 June 2009 02:16 PM

Mace - 22 June 2009 02:15 PM

Is the top in?

Afraid to trade hinted that top is in.

I guess you have sold your calls then Mace.

Only have calls ( Jul) $140 left.  Looking forward to buying calls (Aug) or calls (Oct) $130 provided max pain (Aug) stays around $130.  So, need to keep an eye for how max pain (Aug) behaves over the next one to two weeks.  However, if market rolled over too much, would be considering buying SDS.  The probability of market tumbling is pretty high, AAPL would be dragged down.