short term calls for a likely pullback

From last post the SP500 and the rest of the major indexes did moved higher. The SP500 1370 level was where I was looking for whether it'll hold or not but I was expecting maybe another 1% higher to get the bears to throw in the towel. Maybe it did or did not. Well anyway I have provided a chart that shows the SP500 since the March 2009 bottom with the blue line being the 50 day moving average. I have also drawn short red lines to shown how long the SP500 went without touching its 50 DMA. The longest has usually being 2 to 3 months so currently it's at 2 months and I expect the SP500 (along with the rest of the major indexes) will return to the 'mean aversion' and head lower for the short term to touch their 50 DMAs.

update of last post: could be short term bullish

The last post looked for a short term pullback from 3 to 5%. A week has past and thus far any intraday pullbacks has be met with buying soon after. The Nasdaq and NDX 100 are up +1%. The Dow, Russell 2000, and NYSE Composite are down less than 1%. While the SP500 is up 1/2% with its last year's highs ranging in the 1350 to 1370 level. Thus far the SP500 has held up well at the 1350+ level this past week. Despite some hints of recent internal weakness of individual stocks compared against the major indexes, which means if any selling can't bring the stock market down now then it'll delay it for later, the current consolidation could evolve into another rally higher for the short term. The Nasdaq and NDX 100 are the current leaders but will see whether the stock market will be able to hold the gains if and when the SP500 reaches the 1370 level.

Note: Thus far the posts from August to November of last year have worked out very good as the calls for a long term bottom and rally has been rewarding to the upside. You can go back and review the calls for a bull market while most were fearful for more downside in the coming months.

bullish momentum encounters resistance

The stock market had a nice rally since the last post with over +10% move for the major indexes. The Nasdaq has exceeded last year's high and the Dow is just at last year's high. So this market action could hint for more bullish move higher later in the year. For the short term, and possibly medium term, there could be some caution for the stock market as the SP500 is still a few percentage points below it's 2011 highs. If this were to be the case of either a pause or a bigger correction then there should be buyers below the SP500 1300 level (with 1250 being strong support.) On the other hand, if bullish momentum continues to overpower any brief weakness than there could be just a slow move higher.

got the drop, now looking for a bounce...

From the last post I noted that the inability to hold the SP500 1225 level after an initial bounce could result in a +3% move below the 1225 support level. Right now the SP500 reached an intra-day low of +3% below the 1225 breakdown. With the stock market being short term oversold I would look for short term bounce to start very soon either by tomorrow or Wednesday. The chart included shows what I'll be looking for... a bounce rally back toward the 1225 level and then back below today's low of 1183 (or the price low tomorrow if it moves below 1183) before getting a better short term or even a medium term rally back higher. Other scenarios could develop... the stock market can go either much higher or lower... but we'll see what develops in the coming weeks.

line is drawn... market must hold here

The stock market had a great +1 month rally since the last post. For the last two weeks the 'pause before going higher' scenario hasn't developed and the major indexes has moved down to an important support level. For the SP500 this is the 1225 area. No doubt there should be a bounce around this level but if the SP500 stays around the 1225 area without moving back higher then for the short term another +3% move down could occur.

short term low or bottom for the year?

Was looking for the stock market to probe a bit more lower the last two trading days... especially the SP500 to retest its August lows (which the Dow and Russell 2000 indexes did last Thursday.) But the stock market rallied instead and Monday's big rally should provide at least a short term rally for the time being. The stock market was already near range levels which I would consider very good long term buying opportunity. Which raises the question... could this be the bottom for now for the rest of the year (though just 3 months?) If so then a +20% rally from the SP500 1100 August low toward 1320+ could occur. If not then I still see minimum downside risk of less than 5% before moving back higher.

looks like retest or break down to new lows

Important stock market bottoms are usually a process and not an event. And in the current case it's likely the August lows will be taken out and the stock market should probe lower. This should provide a medium term bottom and rally to occur soon. Unsure if this is THE bottom but should be A bottom. The August lows and at lower levels should provide long term risk/reward returns.