9:00am (EST)
“The market has another week of August before September rolls around and it is usually the most bearish month of the year according to the history books. August also has some bearishness to it but so far the market is up for the month. Last week’s charts for the major indexes and the VIX showed an almost certain test to the 52-week highs and while the S&P 500 technically cleared this level, there was no “fluff” to new highs.
A pullback following a test of the 52-week high is a normal market or stock reaction. The current market is so technical and is falling right on the support and resistance lines we have outlined that we should get a really good read on a possible breakout or breakdown. We went on record last week and said the market could move 5% in September and 10% by year-end up or down depending on the headlines.
The targets we gave were Dow 14,000 or 12,600 in September followed by 14,500-14,600 or 12,000 by year-end. The S&P could be at 1,500 or 1,350 next month which would lead to 1,550 or 1,275 by Thanksgiving/ Christmas. The Nasdaq could push 3,225-3,250 or 2,925-2,900 in September and then 3,375-3,400 or 2,800-2,775 on continued strength or weakness.
There will be a ton of speculation on what Ben Bernanke might or might not do or say this Friday and over the weekend when the central bankers get together in Jackson Hole. The zombies still seem split on if another round of quantitative easing will really work and we have said how the Fed only has one bullet left.
People seem to forget that extending “Operation Twist” and the extended bond buying before that by the Fed was actually QE3 and QE4 so any new stimulus by our count would be QE5. Nothing is working and the comments from James Bullard last Thursday, a member of the FOMC, rehashed how little impact these programs have had. Yes, the first QE worked well most would agree but the real problem is the world governments want growth but growth is slowing and consumers are cutting back.
Perhaps a “saving of the euro” and another round of QE will take the market to new highs but there are so many storm clouds ahead that it is imperative we keep our eyes on the road and our hands upon the wheel. We will continue to roll with the bulls and have a real good time but be ready for a trend change if Big Ben lets the market down and Europe kicks the can off the road and into a ditch.” (from 8/26/2012 Weekly Wrap/ Monday Morning Outlook)…
The bears had the weekly edge heading into Friday’s “Black Hole” as the Dow was down 158 points; the S&P 500 a dirty dozen; and the Nasdaq was off by a hand of blackjack. The support targets we gave last week held like a rock and Friday’s rebound was a direct result of Ben Bernanke promising more quantitative easing. Although it wasn’t enough to win the week, the bulls won August and could have a September to remember if Europe delivers some good news this week. (continued…)
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