Financial Market will Keep Positive Trend

Published: April 12th 2010
in Economics » Local


“In my opinion the bear market was over when S&P crossed a 20-month moving average” – the blue line on the attached chart. “That's a very long monthly chart for the last 10 years,” describes Arie Bonder, a private analyst in an exclusive conversation with Shalom Life


He suggested examining what happened in 2000, when “we dropped under a 20-month MA, and then in the beginning of 2001 we tried to go up, but there was a huge resistance. From 2001 until March 2003, we were in a huge bear market. When did we get out of it? In March 2003.” The main reason, he explained, is due to crossing up the same 20-month MA.


Arie mentioned that the bull market lasted four entire years, until the end of 2007. In January 2008, it dropped again under the same 20-month MA. It lasted until March 2009: “What happened then? A huge rally up to 20-month MA, and I was still bearish, because I thought the 20-month MA will be resistance and we will drop again to a new low. But it didn't happen, we just crossed it up.”


The estimation that there will be a correction soon seems reasonable. “We will correct down, but I think 1000 for S&P will hold and we will continue up again.” He emphasizes the estimation on past results. “Look carefully what happened in 2003-2007. This line was a huge support for the whole bull market which lasted four years”.


When will be a bear happen again? He answers with certainty. “When the 20-month MA will be broken down. Please, pay attention, not tested, but broken, decisively down. In the meantime, the target for S&P is 1247 - upper Bollinger Band (BB) and after then correction.” As the graph is drafted, the positive trend can easily go up for the next 3-4-5 years. “Sure, there will be corrections on the way up, and I think we should take advantage when it occurs”.  


Bonder details that there are a couple secret “indicators, as you can see it on the chart, but the major idea is pretty simple. I try to keep it simple. Do you know what the KISS system means? KEEP IT SIMPLE STUPID. That's what I'm trying to do”.


He reminds us that in 2007, only a few people were talking about the next bear market or about a bubble in real estate in the US market. “One of them was Peter Schiff, and the most educated buffoons were laughing at him. You know what happened in 2008 then. As of today we are climbing the wall of worry... every one is concerned, what will happen? And the market will climb. Again and again, the same wall of worry. The economy in US is bad? Yes, no doubt about it. The unemployment rate is high? Absolutely. But the fund managers, traders, banks will look at same simple chart and will add to their long position on every pullback to 20-month MA”.


The only way to see if he is wrong will be when we cross that line down. “Until then I'm bullish. A very important point: we are not going to new highs. Only if we cross 2007 highs on all indexes, I'll be able to say that we are in a new bull market. The market has been trading in the same range for the last 10 years. It's a tradable market, which can go nowhere for another 10 years.


I hope the 1000 average for S&P will hold”.

Related articles: (bull market, bear market, bullish, financial markets, monthly average, recession)
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