I think that you are correct about an imminent bounce being due in SPY. However, I believe that the upturn will be rather short lived. The 50 day SMA will be an optimistic extent of the rally. Both NYSI and NYHILO have declined to areas where meaningful rallies can occur -- my early warning indicators are mildly oversold. Unfortunately, my longer-range indicators have only begun to decline and suggest a safer trading bottom will be present in 08 Sept. Further, the TED spread has just completed a rounding turn from 0.755 in May to 0.976 today (down from 2.036 in March). Before 07 May, this indicator was range-bound between 0.197 and 0.611. The current level and uptrend suggest that the international financial scene is becoming more unstable. I fear that we are in for another round of asset-destruction revelation. Also, the Y-O-Y ROC of the SP500/Nominal GDP ratio is approaching, but not yet at, the depths from which sustained rallies occur. Therefore, any attempt at a rally by SPY may present a good shorting opportunity as the rally fails. However, if said rally extends 3% beyond the 200 day SMA, the uptrend would be likely to continue. Long-term prospects for the US stock market are not good. US manufacturing once represented 40% of labour utilisation -- now only 9%. It is questionable if an economy can remain vibrant if its main drivers are consumption and waiting tables at restaurants. In 2002, 2% of the population owned 84% of all assets -- up from 48% in 1950. The middle class is fast disappearing in the US. The current round of planned, dollar debasement will likely result in foreigners buying fixed assets at bargain-basement prices; the US becoming a commodity exporting country; and the US dollar rivalling the Yen for the carry trade business.
$131.73 (06/25/08)
