Six Consecutive Week Rally Will End: Lucky 7 For The Bears?

April 20th, 2009

That’s right folks, I said it last week; if we make it six consecutive weeks then the markets will close lower this week. And here we are starting out the 7th week on a positive – for the bearz – note judging by pre-market action with the indexes down over 1%. Last week the Financial sector led the way as Goldman Sachs (GS), JP Morgan (JPM) and Citigroup(C) all reported moderately better-than-expected first quarter results – mostly on trading for JPM. We are now starting the busiest two weeks of the quarter with nearly 140 major companies reporting earnings. With the S&P 500 now up 28.5% over the last six weeks, I am expecting most of news to be mixed and therefore not send us any higher short term. This is because so many companies already came in ahead of forecasts that anything less than everyone beating estimates will send us down.

 

Taking a look at the banking sector – and BAC in particular – you can see from the chart below that we reached a major Fib retracement level this week. Keep in mind that these levels go back nearly 20 years for BAC which only adds to their importance. The rally from $2.50 to over $10.50 was really strong, but clearly NOT a long term base in the least. BAC topped estimates this morning so I would wait a day or two before shorting this stock.

 

bac

 

Moving to Oil. I have said over and over that it will lead us down and that is exactly what’s happening today. It’s down more than 4% this morning and trading $48.00/barrel. I have kept my short term target of between $40 and $45 for oil in blue below. Clearly, that is the best technical level for Oil to bounce off of in the coming weeks.

 

oil1

 

Okay and finally moving to our old friend the S&P. I know you all have been waiting for these today and here they are. Keep an eye on 812 this week as good bearish target. As for the member’s portfolio, we took some great profits on AEM last week and moved down stops on a lot of our shorts to lock in profits. The prospects are amazing this week for our shorts – and it’s not too late to get into some of these. I’ll be back afternoon time for some more thoughts.

 

spx10 

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