October 27, 2014

May have seen a short term bottom in markets

There are several conflicting market tales that seem to have developed.

On the one hand, the short-term market cycle has likely bottomed and I don't expect last week's downside to be reclaimed this year. On the other hand, the S&P 500 index has likely topped for the year. 

To me, the above divergences suggest that, in all likelihood, The Ali Blah Blah Top is in place for the balance of 2014 and we could be entering a continued period of market volatility over the next few months. 

Getting more specific (and recognizing the risks inherent with such a precision of forecast), if I was forced to guess, the S&P is at or near the likely high for the next two months and that 1850-1875 (on the S&P) might be the low end of the range.  

Using a longer three-to-four-month horizon, the S&P (after the 120-point rise from last Thursday morning) has an unfavorable reward vs. risk, with a potential high at 2000-2025 and a low of 1800-1850.