S&P 500 Breaks out
Posted by Don on November 18, 2009
Well no one likes to be wrong, but it looks like I was when I called for a double top last week. The S&P 500 broke thru the 1100 level to close at 1109 and then held the 1100 level yesterday. This should give us another leg up until we run into resistance at about 1150 but more likely solid resistance at 1200.
1200 is first solid resistance now
The economic fundamentals do not agree with the market continuing to go up, but as we found out yesterday the US government is going around the world asking governments to keep up stimulus plans which means that the world will be awash in more cash (mostly dollars as we keep printing them). This will help keep corporate profits up, but will not help with unemployment anytime in the near future.
To add to the bad news yesterday we got a whole slew of bad economic data. Chain store sales came in at -0.1% from the previous week. The October PPI was +.03% which was lower than the expectations of +0.6% and the core PPI was -0.6%. So it looks like inflation is going to stay at bay for a while longer. On the good note foreigners think that US assets are cheap (at least in their currency) as they purchased $55 billion of long term US securities which accounts for both government securities and corporate securities, but US entities purchased $15 billion of foreign securities also.
The point is that our economy has stabilized, and the market has rebounded. Don’t fight the trend of the market which is up, but do continually adjust your investments and rebalance your asset allocation more frequently so that you are more prepared to weather any downturn that may show up in the future.
As always please read the disclaimer. All information is presented as the authors opinion and is not intended as professional investment advice.
