Thursday, June 30, 2011

Market Rally and Upcoming Earnings...

Wow, the market zoomed from 1265 to 1320 in 1 week. Understand, Survive and Thrive predicted an upcoming rally on June 24, 2011, when SP500 was at 1267. In less than 1 week market has risen more than 4%.

Today, I did some statistical calculations and came to the conclusion that during Bull markets the first 1.3 months of a new rally has a extremely low probability for a 5% decline. Therefore, the market can continue to rise into end of July before any significant correction. This will also be a place to exit longs, and wait to re-enter.

However, markets do not rise in a straight line. This means that we should expect at least a partial retracement during early July to digest current gains. July 11 will mark the beginning of the 2nd Quarter earning season. This can be a good point for the market to digest some gains.

The following chart shows that the symmetric market (Top-Bottom-Bottom-Top) response would take the market up until July 11, 2011.

Therefore, one should be careful around July 11, 2011. We will further analyze the Inflection Point Model to better gauge next potential market turn.

"Resignation to the will of God, is the cure of the disease of heart." (Hazrat Ali)

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