BullBear Trading: Stock and Financial Market Technical Analysis

Why S&P 500 Can Rally Back to the 2007 High

As the S&P 500 hovers at its February 2011 high and the Dow toys with its May 2011 peak, many market participants are looking for an important top soon. While I am certainly aware of some good arguments for a new bear plunge--in fact I've been favoring a major top in the first or second quarter of 2012 myself--I think it's worthwhile to examine the body of technical evidence that indicates that a run at the former all-time highs may be in the offing.

My "BullBear" methodology requires me to always evaluate the potential of both sides of a given market. After establishing a solid list of potential scenarios, I examine the technicals of the market. Frequently the underlying technical setup will align itself best with a particular scenario and that will then become my favored market view. If the market technicals do not support any particular scenario, that's generally a signal that it's time to stand aside or hold an existing position. By constantly revisiting the technical condition of the market, I can re-evaluate my market view and improve my chances of keeping on the right side of the market.

I'm seeing the emergence of a set of technical conditions that could have more in common with the 2003, 2009 and 2010 bottoms than with a topping scenario. While at a shorter to intermediate term degree there are many technicals which support a correction of the run off the 2011 low, I am seeing significant indications in the longer term technicals that support an eventual move to the 2007 high.

When a cluster of significant Fibonacci relationships converge on a single point, it bears investigation:

s&P 500 technical analysis

The 161.8% Fibonacci extension of the moves from March 2009 to April 2010, July 2010 to February 2011 and May 2011 to August 2011 as well as the 261.8% Fibonacci extension of the April 2010 to July 2010 decline all converge very near the 2007 highs between 1552 and 1558. Frequently when a number of important Fib relationships convene in one place the market will be magnetically drawn to it....


CONTINUE READING FULL BLOG POST:

Why S&P 500 Can Rally Back to the 2007 High - BullBear Trading: Stock and Financial Market Technical Analysis



Need some help staying on the right side of the markets? Join the BullBear Traders room at TheBullBear.com. You'll get this kind of timely, incisive, unbiased stock and financial market trading, timing, forecasting and investment technical analysis and commentary daily. It's free to join, no credit card is required and if you like my work you just make a donation at the end of each month.



Keeping You on the Right Side of the Market