We are there again ! Physcological resistense/support level of 1300 on S&P 500 index. We faced this at 1200 level in 2010. Market traded in a pretty tight range before hitting 1200 in April 2010. It shot to 1220 on April 23 and then started its roller-coaster ride all the way down to 1022 - a drop of about 200 points by July. The climb back up was also a roller coaster ride, when bulls pushed the market up defying all fundamentals and technicals. We had a first close of S&P 500 index above 1300 in 2 years on Feb 01, 2011 after flirting with it for several days. The very next morning we saw the index dropping 0.27% to close at 1304.03. It tried to creep up several times during the day but finally landed in negative at the close.
We have negative circumstances as in April 2010. Geo-political tensions in Egypt and middleeast, 'Now Ignored debt problem of Europe', Inflation worries in the BRIC nations, Floods in Australia, Snowstorms in the US and the monthly Job-report by end of the week. S&P 500 weekly RSI is already overbought and is above 70. UK economy has contracted in Q4 2010. With government cutbacks looming and Inflation on the rise in Europe, are we sitting in a roller coaster at the top ready for a free fall ? Another 15% - 20% correction caused by combination of factors and global events?
With falling trading revenue in big banks and stricter regulations coming, its just about time for them to book some profit for Q1, 2011 and buy again at the dips - after all, profitable stock market trading is about finding a bigger fool than one's own self ! And it is a traders market and not investors market.
Enjoy the ride !
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