Is it too late to buy into S&P500?

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.

Market Direction Change

As our Stock Arbitrage Trader customers may have already noticed that on November 30th, our Arbitrage model has changed its short-term market direction forecast to “buy” after almost 4 weeks of “sell” recommendation. This means that generic market movement will be upwards and overall risk apetite will increase in the coming 5-7 days.

Market Direction Change 3

For the S&P500, our arbitrage model is forecasting a retest of the October high of 1292 (about +4% gain) in the coming week. The positive drivers from the market will be expectations from the EU leader meetings that are going to be held on 8th and 9th of December as well as positive economic data. Investors/traders who use tight stop-losses might want to watch 1220 as an interim support level.

“If you don’t already own” Stock Arbitrage Trader take advantage of this positive movement by downloading the app for your iPhone or iPad here!

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