Saturday, November 5, 2011

How High Can the Stock Market Go?


The S&P 500 was down about 0.6% to 1253 on Friday and the VIX was down 1.1%...a good sign, although VIX is still stubbornly above 30. 

The S&P 500 remains in a Secular Bear market until it takes out the old highs around 1550.  I don’t think we’ll get that far, but who knows?  This bear market that began in March of 2000 is likely to last 20-years.

As I noted in Thursday’s blog, a 29% climb from the bottom is the lowest rise in past history after a cyclical bottom (at least when records were available), and that would take the S&P 500 to around 1420.  That seems doable, assuming we don’t get overtaken by bad news somewhere down the road.  In the near term, we tested the 1100 area just a few weeks ago and the S&P 500 is unlikely to go there again anytime soon, but of course, there are no absolutes in this game.  My guess is that we’ll see a bounce if we get down as far as 1225 this week and we’ll probably bounce sooner.  

The NTSM analysis remains BUY as of the close on Friday. 

I bought back into the stock market at S&P 500, 1155 on 7 Oct after the 6 Oct NTSM buy signal.  I remain 100% long in the long term portfolio (100% stocks in the 401k.). (See the page “How to Use the NTSM System” – the link is on the right side of this page). 

I am 75% long in the trading portfolio.

Just a reminder: 100% invested in stocks is way too much for most rational folks.   Don’t do it unless you have a high tolerance for risk.  Bad news in Europe could send the markets down in a hurry.