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QVM Quick Market Note: SP500

Short-term S&P500 is dead center between recent high and low, still only a rally, but not yet a resumption of up trend. Long-term S&P500 is above 50% retracement of 2007 to 2009 low, but still not in clear running territory.

The "popular" 1400 price target (about 14+ times approximate 95+ 2011 operating earnings estimate) is shown by red line in attached long-term chart. Approximate 1100 recent low as a support level is shown in another red line. Sometimes mentioned recession support level at about 1000 is also shown shown in red.

The recession scenario is variously predicted as most likely (e.g. 60% by Roubini), but less likely (e.g. 30% by UBS).

We are likely to receive a shot of B&B soon (no not Benedictine and Brandy, but rather Ben and Barack). While further stimulus is likely to be less effective than prior stimulus programs (each one less effective than the other), the markets are likely to react favorably to stimulus, at least for a while.

The bias is probably up, but the uncertainty level is high. Europe has the potential to create key negative news.

Headlines are all over the lot and conflicting. While headlines should not drive behavior, they probably do. Here is a sampling of headlines from Bloomberg yesterday:

· S&P 500 Index Posts Best Eight-Day Gain Since '09 on Optimism Over Economy
· Treasuries Head for Biggest Monthly Gain Since 2008 After U.S. Downgrade
· Business Activity Growth at Faster Pace Allays U.S. Manufacturing Concern
· U.S. Companies Add Fewer Than Estimated 91,000 Workers in August, ADP Says
· Crude Heads for Monthly Decline in New York as Slower Growth Curbs Demand
· Copper Rises to Three-Week High as Factory-Order Gain Bolsters Confidence
· Gold Caps Biggest Monthly Advance in 22 Months as Fed May Take More Action
· Emerging Market Stocks Advance for Fourth Day on Fed Stimulus Speculation
· Wen Says China to Focus on Taming Inflation Even as Economic Growth Slows
· Australian, N.Z. Dollars Poised for Monthly Drop on Signs Growth Slowing
· Canada's Economy Contracts for First Time Since 2009 on Decline in Exports
· Stocks in Europe Climb Most in Two Weeks on Signs Fed MAy Support Easing
· Retail Sales Unexpectedly Held Steady in July in Germany After June Surge
· Japan Output Less Than Forecast as Global Slowdown Hits Post-Quake Rebound
· Brazilian Industrial Production Rose Less Than Expected 0.5% Last Month
· UK Stocks Rise for Second Day as Fed Prepares Ground for Possible Easing
· Consumer Confidence Declines as Economic Outlook Falls to a Six-Month Low

 


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