Alright, so it’s the end of January already…not exactly the bullish start some of you were hoping for but patterns are developing and in my eyes, that’s good! On the daily time-frame we are again below the 50-day moving average, and clearly the big winner this past month was gold. I’ve been holding ABX for the past little while but I should disclose that I’ve taken a profit and am no longer holding any more shares. However, I am still keeping a watchful eye on gold as I still see it as a long opportunity.

On to the S&P 500…if you haven’t read my last two posts, you should. None of my trend-lines have changed…I’ve omitted a few lines in my next chart to make things clearer, but my previous lines are just as important…so please refer back to them.

Can anyone tell me what pattern is developing? Refer to the descending red and ascending blue line…if you’re thinking a symmetrical triangle then you’re spot on! Symmetrical triangles can be characterized as areas of indecision. A break below the lower trend-line signals a move lower, while a break above the upper trend-line signals a move upward:

Now with that said, we are sitting right above 825…as I said in my last post, 825 is acting as support so any close above 825 is still bullish. After this week’s past activity, I would be cautiously bullish. However, a break…or more importantly a CLOSE below 825 is a bearish signal. It is very important that we close below 825 before going bearish, don’t be greedy and short before confirmation, if you do you could easily get stuck on the wrong side of the fence.

As mentioned above, I would only be cautiously bullish this coming week. This symmetrical triangle formation is favoring the bears. Further, we are clearly still in a bear market…markets like these have unlimited downside, anything can happen in regards to downside projection.

Remember this chart? I posted this Dow chart in my last article. The S&P is clearly much more bullish than the Dow…Friday’s close confirms this. We closed below the ascending blue line and this my friends is dangerous! Again, if we close below 825…preferably 820 on the S&P I will go bearish. Shorting the vulnerable Russel 2000 may be one of my moves. ETFs like TWM or TZA are possibilities.

Happy trading!…and please tell your friends and family about H.A.S., help us spread the word!!

Richard
richard[at]hedgeagainstspeculation.com

Firstly, let me apologize for the down time Hedge Against Speculation has been getting. This is the cause of switching domains, I obviously did not do it correctly thus causing H.A.S. to be down for the past couple days. Nevertheless, it is up now so let me introduce you to our shortened domain…wait for it…wait for it……WWW.HEDGEAS.COM! Hope you peeps like it!!

But before I continue on with a market update I should thank all those who have continued to support H.A.S., so thanks once again for all your kind comments and emails.

Now on to the markets…let me refresh your memory and re-post Jan 22’s chart:

On Jan 22nd we were clearly under the second blue line. Today the S&P 500 (sitting at 845) clearly closed above this blue line. This my friends is very bullish, if we continue to stay above this blue line we should be testing resistance at 925 fairly soon. But wait…let us take a look at the Dow:

Here we are still within the two down blue lines. The shorter term time frame shows that we are still improving but a break above the upper blue line needs to happen. What’s positive though is that we have a higher swing low…this is indicated by my blue line trending up.

Here’s a little reminder though…the Federal reserve meeting is tomorrow, so be very careful with your trades. I have a feeling that this meeting may act as our catalyst for the Dow to break resistance. Further rumor has it that there is a lot of insider trading going on right now…CEO’s and Directors are buying into their companies again, let that be a sign that tomorrow may potentially be a good up day. And I just got word from my friend Marco at Option Maestro that the financials are up big in after hours trading. There’s some news flowing around about what’s going to happen to banks etc…BAC, UYG, and FAS are all up around 10%. Keep all that in mind while you trade tomorrow!

Richard
richard[at]hedgeagainstspeculation.com

After contemplating whether or not I should continue blogging I’ve decided to renew Hedge Against Speculation’s domain for another year. So what does this all mean? Well you’ll be seeing plenty more posts from me throughout 2009, I’ll provide you with ample market analysis to hedge yourself against any risk in this poor economic environment. Further, H.A.S. may have a brand new look as well, so stay tuned!

On to the markets…the markets have been pretty uneventful since I last posted. Clearly, the larger picture is still very bearish. Until we find a bottom, all trades to the long side should be kept to daily time-frames. Like usual, let’s take a look at the S&P 500:

All the trend-lines I drew are significant ones…let’s start with the support lines. Our nearest support is a falling line, if we break below 800 we should fall fast and hard towards 775. A fearful fall to 750 could easily happen at that time…I use the term “fearful” because any break below 750 would be a lethal one, 750 is our last defense! Take a trip back to late November…we could’ve easily fell to 500 two months ago.

On the bright side, if we break above 840 we should see a bull run hitting our heads at the MA(50) or my green resistance line. This would be a nice run up, and something I foresee happening. However, it is more likely that we stay within the two falling blue lines and move sideways for the next week or so.

Now you’re probably wondering…when are we ever going to see a bottom? Well we’ve been close to one, but not until we get a double bottom will any chance of a bottom arise. I’ve said that many times, but a true bottom is never “V” shaped, bloggers have been calling bottoms all year round…remember back in November 20th or so when peeps were calling that a  bottom?…well thumbs up to them for finally picking a short-term bottom but a true bottom is never shaped like a “V”.

So let’s take another look at my chart and play out a few scenarios:

1. We will not break through 840 and simply head towards 750. A sign that this may happen would be if we close below today’s low TOMORROW! We may be heading for another leg down if this happens. This may look bearish but it would act as the quickest reversal scenario for the S&P. Long term bulls should be loving scenario #1.

2. We break through 840 and head towards 925…from here we will get some sort of panic selling causing us to retest our 750 lows. From here we will start to recover, this recovering will take longer…it may take us till September before anything reverses.

Those are the two scenarios I foresee…I will let the markets play out and keep you all posted if anything changes. I do apologize for the lack of posts in the past month, and I do appreciate those who still come to my website even with the lack of posts…I was plesently surprised to see 250+ clicks/day without any new articles. Oh, and if anyone is interested in doing some guest posts for me, please let me know…HAPPY TRADING!

Richard
richard[at]hedgeagainstspeculation.com