Early 2009 Stock Market Prediction

For most of December the stock market has not done much - drifting around in a specific range on the Dow and S&P indexes on low volume. After the nightmarish volatility of October and November, things have calmed down with the volatility in the market actually shrinking. The S&P 500 - the index I pay the most attention to - has been trading in a range of 918-850 for the past three weeks. The next big move in the S&P 500 (e.g., 100 points or more) will begin once the S&P 500 breaks out of this range.

If the S&P 500 were to close below 850 I would expect to see a quick move down to the November lows (around 740), putting in a double bottom (technical traders consider this to be a good thing, essentially a test of the previous low and recovering without go significantly lower). However, if the S&P 500 breaks out of its 918 short-term resistance point I’d expect the S&P 500 to rally up into the 1000-1050 level by mid-February at the latest and then top out to have another correction that would take the market at least down to its November low.

The real take away point here is that IT IS QUITE LIKELY THE MARKET WILL RETEST THE LOWS OF NOVEMBER. This will happen sooner if the lower end support on the S&P is broken at 850 in the next couple of weeks or later into the first few months of ‘09 if we quickly move up through the 918 resistance point (more likely the latter in my opinion).

You need to be nimble and understand market trends to make money these days. The market action in the next couple months will be a great way to see how the Buy and Hold strategy of “yesteryear” is flawed and will get you nowhere in your portfolio. If the market turns up soon, I wont be buying much and will wait to short it on it’s return to the November lows. At that point, we should see the beginning of a nice bull market that will be with us for quite awhile.

This is the last trading day of 2008. If you have gains (Yes! Somewhere, someone … has gains) you may want to get out of some of your losing positions to offset the tax hit on your profits.

The market will be fun to watch over for the next 4-6 weeks…hang in there.

Market Perspective 12-12-08

It appears that the stock market is basing for a nice upturn.  If we bounce off of the current downtrendline at about 855 on the S&P500, we should see a nice rally into 2009, maybe even up to the 200 day moving average … something we are a ways away from now.

After that, it could be a retest of the lows we saw in November.  The economy is just now getting into the full throws of the recession that is upon us and it is not going away anytime soon.  Continuing to print money and throwing it at any problem that comes along is going to start to come back to haunt us as well.

I see that the automaker (auto-faker?) bailout died in the Senate.  Must not have been enough pork in there Read more