S&P and NASDAQ 100 Update

By August 19, 2012 Market Analysis No Comments

S&P recently hit the bottom on July 23rd 2012 and since then it has been in uptrend. S&P closed at 1418.16 on Friday, August 17th, 2012 and is 4 points shy from the recent bull market. Those who did not participate in this bull market will start participating and S&P should break 1422 in next few days. There will be lot of stops sitting above 1422 and these will be taken out.

European market also rising since Mario Draghi recent comments. However, the Chinese market is still down. Past quarter earnings were not that great, however, stocks responded positively even on negative news. So this is bullish for the market. Lot of companies did not guide their earnings upward so next quarter if they beat the earnings then this will further fuel the market to the upside. Even home-builder sector has become stronger and stocks in these sectors are rising and seems like will break out. Take a look at LEN and DHI charts for example.

When stock market is not rising strongly and interest rate is low investors invest their funds in dividend yielding blue chip stocks. When interest rate starts rising and the market overall also moving up then the same investors take their money out of these slow moving dividend yielding safe stocks into faster moving stocks of the sectors such as Energy, Financials, Industrials and Technology. Currently, interest rate is inching upward, therefore, dividend yielding stocks are not that attractive which forces investors to invest in the above mentioned sectors which helps in having a broad-based rally.

AAPL has broken out and closed at $648.11. It is headed to my long-term target of $710 which I published on my blog when AAPL was merely trading at $422.

For my recent article on AAPL which was published on Seekingalpha “The AAPL Stock Split And its Effect On The DJIA” please read by clicking the link given below:

http://seekingalpha.com/article/786001-the-apple-stock-split-and-its-effect-on-the-djia

Now, if we concentrate on some of the badly beaten stocks of last year then two names come to our mind. SHLD and FSLR. SHLD got butchered and fell from $200 to $25 and now sitting pretty at $59.49 and looks like buyers are interested in it. Also have you seen FSLR recently? This one fell from $320 to $11.50 and now have been rising and sitting at $22.00. So it has appreciated almost 100 percent in a matter of few weeks. There is renewed interest in FSLR and it looks like will rise upward and something worth considering in good returns on the money fast, either via shares or long calls.  The point I am making here is that those stocks which were hated most during last two years have started rising. From Home-builders to Sears to FSLR. One can say anything he/she wants to say about economy, unemployment situation but stock market is rising be it FED money or institutions and one cannot deny this fact and must trade according to the trend of the market which is currently up.

From mid-August to late September market in the past usually goes sideways but this year it is different. My target on S&P is 1435-1440 and it could even reach 1465-1470. However, there are two dates which are approaching where the market could pull back. We have to remember that market stalls out when it is rising and least expected. Therefore, as traders/investors we should always be on the lookout for any clue of market top forming in near future.

There is one scenario which could play out this week which is as follows:

S&P takes out 1422 this Monday and heads toward 1430-1435 (that is very close to the target of 1435-1440) and then pulls back to 1390-1396 level and then start rising upward again and moves towards 1445 by Labor day holiday.

NASDAQ 100 is also very close to making new high beyond 2795, however, it can overshoot this resistance and halt. Will it just stop temporarily and continue to rise or make a south turn we will find out this week.

Watch for the US Home Sales and Jobless claims.

I hope the above helps you in putting on the profitable trades in this coming week.

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