The market leadership remains in the inflationary side, and the speculation soared. The market valuation was fully reached for 2011 at a tad under 1350 on SPX basis before a notable sell off began. So, it appears that this market will want to fully price the 2012 earnings around 1380-1400 due to the inflationary pressures building up in spring. This probably sets up for a big disappointment in the second half as the higher interest rates cannot be supported much going forward, but we will have to evaluate it when it needs to be.
The fundamental commentary aside, the sharp up trend of the moving averages generally favor a slower roll over as the energy sector is not set up for a big failure like it happened last April. Hence, the market somewhat supports a running correction scenario as well ahead of a blow off in April-May period. The market should be due for the dominant intermediate term cycle lows (60-62 and 38-40 wk cycles) later in March (16-25). There is a slim chance for the final lows to happen around early April.
The obvious price target is around 1280 gap zone on SPX basis immediately ahead, but there is a good chance to decline further down to 1250-1260 major support, or roughly 80-90 points for a correction. The 1250-1260 zone was tested repeatedly by the bear and bull markets over the past 10-12 years. I think the up trend comes under a severe attack below 1250-1260, but a new high should be still expected in spring.
I think the running correction scenario limits the downside to 1270-1280 zone, but the futures lows from January 28th around 1265 on SPX basis could be still a momentary target in March.
Best of luck,
Full-time Internet Poster
Especially when they share it.
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This whole drop has occurred from new highs... Previously, a drop such as this from new highs is a buy, but the bulls have been running for so long I wonder...
