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SPX up again! Is it a buy opportunity?

Many investors may be celebrating and cheering up the market’s performance these days. The economic data are good looking, Eurozone is close to a debt solution, the market is rising, all is good! Buy, buy, buy…

You may be hearing that or something similar today. But is everything really that bright as it looks?

Check the chart below and answer yourself a question, “Will you be willing to be buying when the market is approaching to 200 day SMA and a major resistance level nearby?”

Enlarge the chart

The last rally was definitely impressive, but it was happening without any corrections on the way. The Eurozone is noway close to a solution and they still may be facing a major issues ahead. The Euro leaders are just kicking the can down the street (mainly waiting for their banks be ready for Greek bankruptcy) and Europe is still in a big trouble although now it may appear that we are going out of the forest. Not even close to it.

We are also facing to a huge overhead supply:

Enlarge the chart

All those people who bought stocks at those levels in the green oval are eager to start selling when they break even to recover their loses. Considering similarities in the market movements and cycles it moves within, we may be turning down to correct this rally.

And that will create a new lower high. A great opportunity to short the market, since we still are in a bearish correction.

Check the similarities between 2008 and today (the upper chart is 2011, the lower is 2008):

Enlarge the chart

In 2007 – 2008 the market had a nice strong rally, which at the end of December 2007 corrected sharply down. Then we went through a side way consolidation and rallied back up to 200 day SMA. Same as today. But then the market collapsed again. Well later on it crashed totally and I think we will not go that far down as in 2008, but we still may see the sharp correction down (see blue line). Note even similar over shots thru the supports on both charts (circled).

Of course, anything is possible in the market and it may act totally different today, but considering the overhead supply waiting for the chance to get out, unsolved European debt crisis, not so good US data, slowing down in China (plus their fraudulent accounting), I think we are still heading down.

My previous timing wasn’t that correct and I took a few losses in shorting SPY, but now I am waiting for the market to reverse into correction to buy puts on SPY once again. This correcting leg will be crucial, because it may be a beginning of the new bull trend if we create a higher low pivot this time.

Happy Trading!

2 responses to “SPX up again! Is it a buy opportunity?”

  1. Houdini says:

    Yeap, SPX is buy buy buy… The crash is round the corner!!!

  2. Linda says:

    Good blog about investing!

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