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Market Update

  • March 6, 2010 12:34 am

on the 15th of March, 2009  Ben Bernanke appeared on 60 minutes.  One of the opening questions was:-

PELLEY when I called and proposed this interview about a year ago, your representative laughed out loud. And said, “The Fed chairman never does an interview.” I wonder why are you doing this?

BERNANKE Well, it’s an extraordinary time. It’s an extraordinary time. This is a chance for me, I think, to talk to– to America directly.

In extraordinary times what would our government do to turn things around.  Answer:  Anything they can, legal or illegal.   Since March 2009 have we been dealing with a Managed Market for a Managed Economy.

Now many have suggested that the Fed (or PPT) is buying SP500 futures every monday night.  I say nay – they are a pretty dour group and news would somehow have come out.  Addittionally Gld and Oil have also gone up, along with most world markets and I cannot see the Fed trying to cause the price of Oil and Gold to go up.  Of course if they printed a couple of hundred billion dollars and gave it to a few key banks, with the guidance to put it in the markets – then that wold account for all asset classes rising in unison.

Now that’s over then let us look at one of my predictive charts from last July:

As you can see, in this chart, I thought that we wold get back up to the major trend line of the bear market at 114 – we reached just over  115 so I was out by around $1.  I did think the rally would complete by late November 2009 and, in terms of the SP500, it appears to have ended in mid January 2010 – which means I was out by about 6 weeks.

Now let us have  look at the Major Bear Market trend Channel:

SPY Medium Term

As you can see there have been several attempts to get out of the channel, including Oct 2007, spring 2008 and last Friday (March 4 2010).  In prior attempts this initial escape was marked with an immediate (within a week) push-back into the channel and a decent sell off.  If we take a close up of the last 60days action then we can see how important Fridays action was:

SPY Short Term

As you can see we gapped up to above the line in the low-volume Thursday night futures market.  This meant that this critical resistance line never had a chance to be tested and upon opening all of the stops above it started to triggered.  This resulted in a low-volume melt-up all day with a buying frenzy in the 3.30 to 4pm purchase-before-mutual-fund-Monday-ramp-up.  This means that the SPY closed (both day and weekly) above the line.   The volume was nothing to write home about and the market ended up extremely overbought with negative Divergences abound.  For the bear case to remain intact the Bear Channel needs to be reentered early next week.

So what does this foretell – next week we either Crash like 1987 / 1929 or we move further into the world of make believe.

Abby Cohen

  • August 19, 2009 6:15 am

Many people were recently impressed by the prediction of Abby Joseph Cohen, of Goldman Sachs, that the S&P would be at 1,100 by year end.  I thought it would be worth looking at some of her recent predictions.

In an August 10, 2007 appearance on CNBC Abby Joseph Cohen predicted the S&P 500 would rally to 1,600 by December. – Wrong

In December 2007 Abby Joseph Cohen predicted the S&P 500 index would reach 1,675 in 2008. The S&P 500 traded as low as 741.02 by November 2008. – Wrong

On May 1st, 2009 Abby Joseph Cohen predicted, “The Standard & Poor’s 500 Index may jump 20 percent to 1,050 over the next six to 12 months as investors buy stocks trading at low valuations” – Near enough, so Correct.

On August 6th, 2009 Abby Joseph Cohen declared, “the new bull market has begun,” and proclaimed Goldman Sachs sees the benchmark Standard & Poor’s 500 index .SPX in a range of 1,050-1,100 toward year-end. The S&P 500 index traded around 1,000 on August 6th, 2009, after a 50% run-up from the year’s low. – We will see.

So out of the 3 recent predictions that can be verified 2 out of 3 were wrong.  Paraphrasing Meatloaf : 1 out of 3 is bad.  based on her prior predictions I would put the chances of her recent prediction being correct at less than 50% – which makes her less useful than tossing a coin.