OptionSpreadTrades.com Weekly Forecast
We still have a buy signal on the weekly charts from 895.75 on the March S&P contracts. The markets is currently at 925, and momentum has finally crossed above the zero line and stochastics are still turned up.
On the Daily chart the S&P has crossed above the 50 Day moving average denoted in the pink, which gives added bullishness to the market. We've already gotten a close above the December high of 918. If we can manage to stay above this area during the first real week of trading for 2009 that we're coming into, then it is likely that we will head toward over head resistance at the 1010 area.
Commercial Traders have given another sell signal on the S&P pushing the COT Index to its maximum bearish of 0. This means that continued selling is likely to continue once this technical bear market rally has ended. However keep in mind that the Commercial traders are often early on a move since they scale into positions. What this means is that the markets can continue to rally substantially or move sideways for awhile before we get a technical sell signal. However when it does break the smart money is that the big move will be to the downside.
We've entered into what is known as the January barometer in which the first 5 trading days of the year give an indication for what is going to happen for the rest of the year. This indicator has been accurate 86% of the time over the past 36 years. Monday is typically a bullish day with the Dow up 12 of the last 15 years and the S&P up 71% of the time. With that said post election years are usually bearish with the dow dropping an average of 22% from its post election high to its mid term low the following year.
Everything is pointing to a continuance of the bear market rally that we've been seeing. However we do not believe that the moves will be substantial and quite possibly they will just move sideways.
Happy Trading and Happy New Year,