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Monday
Sep202010

S&P 500 Breakout

In our prior post we noted that the S&P 500 was starting out the week at a key inflection point at the top of its multi-month trading range.  As things now stand a couple hours into the trading day, the bulls appear to be winning.  As shown below, the S&P has broken above resistance and is now trading at its highest level since mid-May.  So what's leading the market higher today?  Of the ten S&P 500 sectors, Consumer Discretionary is up the most with an intraday gain of 1.74%.  Energy is up the second most at 1.39%, followed by Industrials at 1.23%.  Financials and Technology are both up at least 1% as well.  The defensive sectors (Utilities, Health Care, Consumer Staples) are unsurprisingly underperforming today, but the Materials sector is doing the worst with a gain of just 0.55%.

Reader Comments (1)

The S&P did not break out; the rise in the S&P's ETF, SPY, on September 20, 2010 to 114.21, as seen in the green mark on your chart, was simply a blow off top, as the S&P traded lower on September 21, and 22.

In fact, the April 26, 2010 bear market, recommenced on September 22, 2010, as traders sold Banks, KBE, European Financials, EUFN, Nasdaq Banks, QABA, Semiconductors, XSD, and Software, SWH.

This despite a higher Euro Yen carry trade, that is a higher EUR/JPY, which rallied Base Metals, DBB, including Tin, JJT, higher, while Oil, USO, fell lower. The Euro, FXE, was easily easily called higher to a stronger level of resistance at 133.4. The Yen, FXE, was called higher to 117.1, which is the area where the Bank of Japan is likely to start to intervene, to stop the rise in its currency by selling Yen.

The debt deflationary bear market that started April 26, 2010, has recommenced, as is seen in the ratio of the small cap pure value shares, RZV, to small cap pure growth shares, RZG, falling lower.

I expect the Euro, FXE, to fall lower from 133.4, as competitive currency devaluation commenced when the Bank of Japan intervened in the currency markets, to stop the rise in the value of its currency.

Wealth is best preserved by investing in gold, definitely not by investing long in stocks.

September 23, 2010 | Unregistered Commentertheyenguy

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