Ian Woodward's Investing Blog

This S&P 500 Wedge is a Meat Grinder!

Sometimes the Stock Market can do funny things to the best of Technicians, especially when it is so skittish and entirely event driven.   There seems to be a temporary air of good feeling which is taking earnings in its stride, as corporate America so far has cleared the low bar set by Wall Street.  Also, after falling at a 6.3% annualized pace in the fourth quarter, a 5.1% decline for first-quarter GDP was the median forecast of economists surveyed.  “Despite the massive contraction in the economy, the expected composition of first-quarter GDP should show encouraging signs,” wrote economists for Credit Suisse.

It would seem we need a new definition of a Wedge, and should take a leaf out of the Surfer’s book.

          wedge

The Wedge is a combination of two waves that merge together, thrusting into a titanic slingshot that breaks with enough pounds per square inch to send an Iron Man to the mat.  The Bulls are hoping for such a sling shot that will swing for the fences with at least a 41% Bear Market Rally from the low to take it to the illusive target 940 level we have talked about – the “Higher” Target.  However, before the Bulls get too carried away, there is the little problem of a double top just above Friday’s close that the Market must get above at 875.  Otherwise the pundits will be saying all is not lost for the Bears and the Market is headed for a correction should it not get past that number with authority.

The intra-day Type 1 and 2 Traders are scratching their head as they have to contend with awful zigzags as the market heaves, bends and pulverizes even the intra-day players:

Intra Day

So given all of that, here is an Updated “Ideal” Road Map which shows the alternative Targets which have come into focus.

road

The three immediate Targets for the Bulls are:

1.  Get past the Double Top at 875
2.  Drive for the reasonable follow-up to 900
3.  Then Swing for the Fences at 940, 41% up from the Base Low of 667.

The downside looks better and better with every notch higher.  It goes without saying that the Bears lick their chops the higher the market goes, but meanwhile the early birds are having to cover their shorts. 

1.  The most important psychological Target is to stay above 800, almost an 8% cushion.  That would bode well for a continuation of the current rally as the pundits will jabber about an Inverse Head and Shoulders set up for the next leg.
2.  After that, anything between 780 and 800 would be disappointing but at least gives hope.
3.  If the market breaks 780 we head down into the Abyss one more time.

Best Regards, Ian.

7 Responses to “This S&P 500 Wedge is a Meat Grinder!”

  1. Lou Powers Says:

    Could the pig flue scare that is developing today be the driver that stops this drive and develop the next buying opportunity. Futures are not looking good tonight. Thanks for your continued good work.

    Lou Powers

  2. ian Says:

    Hi Lou: Yes, the pig flu scare can absolutely upset the applecart…good point Lou. Many thanks for the encouragement and glad you enjoy this good stuff.

    Ian

  3. Charles E. Hughes Says:

    Ian:
    How clearly and concisely you interpret and analyze the confusion. Thanks for brushing away the fog.
    Charlie

  4. ian Says:

    Charlie: Many thanks…that’s music to my ears. It is nice to feel appreciated and gives me strength to do more.

    All the best, Ian.

  5. Theresa Hui Says:

    Hi Ian,

    We are presently on a tour in China, after having spent a few days in Hong Kong visiting our son. Every chance we have getting on the internet, we always check your blogs first, even though we are out of the market (due to our travel). That’s how “addicted” we are to your blogs!

    We apologize for not having written any thank you notes in a long time, but please note that we DO appreciate every & each one of your blogs!

    Have a great summer, & please send Pat our best regards.

    Best regards,

    Peter & Theresa

  6. ian Says:

    Hi Theresa:

    I’ve missed your words of encouragement and now I know why. I am glad you and Peter are taking some RandR and enjoying visiting your son and the sites in Hongkong and China. I expect you to come back with all sorts of tips on Chinese Silverback stocks for us to buy at the next seminar.

    Have a wonderful trip and Pat joins me in sending you both our sincerest wishes.

    Ian.

  7. David Galardi Says:

    Ian,

    Another outstanding analysis that this youngster can only dream of delivering. Thanks for the wisdom and keeping us on the path.

    David

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Disclaimer: Commentaries on this Blog are not to be construed as recommendations to buy or sell the market and/or specific securites. The consumer of the information is responsible for their own investment decisions.