Since our last buy recommendation on the generic market on January 12th, 2012, the S&P500 index rallied about +2.5%, reaching 1,316.33 as of Friday 27th. As a lot of our clients are asking whether they have missed this upward trend, we would like to share our current view on the market:
- Statistical arbitrage still recommends “buy” – Our market model algorithm still indicates upward moves in the market direction. While volatility may rise (as measured by VIX), the model predicts bullish trends to continue for the coming 1-2 weeks.
- Technically speaking, we may easily see 1,347 in the S&P500 in the next 8-9 trading days - While temporary setbacks are possible, we believe that they should be used to enter the market on the long side. 1,292 can be seen as an interim support (or stop for aggressive traders).
- Fundamental developments are positive, too - While some investors in the market were hoping for a quantitative easing #3 (QE3) from the FED last week, Bernanke’s extension of exceptionally low interest rates until Q4 2014 can easily be seen as a QE2.5, thus positive news for all risky assets.
So, our short answer is no, it is not too late to buy into S&P500 as we reiterate our bullish view on the generic trend.
Stock Arbitrage Trader will help you take advantage of the bullish trend.