Tuesday, April 19, 2011

Stock Market Analysis - April 18, 2011

"He who is deserted by friends and relatives will often find help and sympathy from strangers."Hazrat Ali

Based on current sentiment readings, historical perspective, indicator's analysis and Elliott Wave structure, it seems that we are approaching an inflection point. Therefore, one should be ready to buy the market. This observation is in agreement with the Inflection Point Model. Market Matrix is given below. 

There are many green lights. With very good risk-reward ratio. It appears that we are nearing a bottom, within a primary uptrend. This bottom  will be confirmed by a break above 1320(closing). It is a good time to buy with cycles bottoming, technical improving, sentiment  neutral to pessimistic  and  waves complete.  We will wait until verification from the trading model before going long. If market closes below 1295 then market could see further selling.  

Various supporting wave structures will be discussed in next post, while the cycle turn dates have already been discussed in the last blog update. These supporting wave structures would include: Emerging Markets, Real Estate Index and SP500. 

One important development to keep in mind is that although we have not witnessed a sharp decline in the optimism towards the market by newsletter writers, geopolitical, political and economical events such as end of QE2, Lowering of US outlook by S&P, corporate earnings anxiety, Oil related stress and war in Libya, have induced enough confusion which can give way to a sustainable rally. 

Even with all of this analysis, one should always remember that only price pays. Therefore, one should always trade in the direction of the primary trend and have a comprehensive risk-management strategy. 

Thus, in terms of Risk-Management the market is currently buy-able as long as it does not close below 1295. Furthermore, uptrend will be re-confirmed on a close above 1321 (SP500).

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