Sunday, December 23, 2012

SPX - Super Bull Scenario

A few days ago I received an email from a very good trader friend of mine (we traded together in few chat rooms). He said that "looking at the charts", he "kind of thinks we might have a super bull on our hands". I responded by saying that "it was too early to tell... that we are still bound by the double top at 1552 - 1576 on SPX... unless we break above it and stay there, we are vulnerable still... cyclical bull in secular bear is what we have now..." I did say that "this still gives us plenty of room to go up next year..."

After a few days of thinking I decided that Super Bull scenario cannot be ruled out. What if "secular bear" conventional wisdom is all that market needs to demolish those previous tops at 1552 and 1576 in contrarian style? What if bears are all wrong about fiscal cliff, recessions in Eurozone and Japan, and China slowdown affecting U.S. growth in 2013? We are just 10% below the all-time high. Fed, ECB, BOJ, and PBOC will continue to stay easy. Our economy and corporate earnings may surprise on the upside. And yes, some of that bond market "mattress money" may end up in stock market next year.

So with the above in mind, I put together a weekly on close chart of what this Super Bull may look like next year. At projected target of 1680, SPX will have to blow passed the all-time high, and go up 17.5% from Friday's close.

click on chart to enlarge

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