Are You Ready for a Year-End Rally?
10/30/2012 6:45 am EST
Here are some key levels for the S&P 500 that MoneyShow's Jim Jubak is watching, because a year-end rally would not surprise him.
For the week ahead, look at the 50-day and the 200-day moving average on the S&P to see when we’re going to get our oversold bounce. We’re not there yet.
On October 23, the S&P closed at 1,413. Now, that’s below the 50-day moving average, which is what’s made people so well sort of scared, leery, etc. But it’s not a huge drop from where we were, and looking for a bounce here I think is really premature.
What we’ve been doing over and over and over again is bouncing off of the 200-day, and that’s the point at which we can say the market is oversold. Where’s the 200 day from here? Well if we’re at 1,413 the 200-day is around 1,375, so we’re not looking at a big move lower before we can say well the market is oversold and we’ll look for one of those bounce-rally things.
If you’re looking for the end of the year when we normally get some kind of rally, when we get end of the year tax selling, it usually happens somewhere around October 18 through October 25, so we’re right about on schedule for a bottom in this market. But again, I’m not sure that we’re talking about exactly that date.
We usually get a rally through the end of the year. It’s not guaranteed but you know trends say more likely than not, and right now it looks like we might be moving to a situation where we can get an oversold market which would then feed into that rally and that would give us a decent November and December.
The rally could be truncated, of course, if after the presidential election we get lunacy out of Washington that makes people really, really, really worried about the fiscal cliff. But right now this is a pretty decent pattern to look at that could be disrupted by that.
I would say through the end of the year we might actually be looking at a rally. 2013 is another ballgame entirely. I wouldn’t count on the end of 2012 leading into 2013, but hey, a rally that lasted for six weeks would be six weeks that I would be willing to take some profits on.