In early fall 2012 before the QE3 was announced and the markets were falling i predicted that S&P500 will reach 1600-1650 level before the new year. i remember traders telling me - Ben is not going to QE (it's a verb now) while SnP500 is at 1400 highs! no way! and i said - 1400 has nothing to do with it, they will ease because the markets are balancing on the knife edge. and Bed did. but the forecast did not happen with all the fiscal cliff talks right before the NY and i dropped that forecast because it ran out of time frame. it looks like i was too quick to do it and that those levels are actually where we are going now...
the most logical SnP behavior would be to follow the scenario number 1 on the graph - it's logical to correct, it's logical to even fall down into a bear market with all what's happening in Europe. it's logical by most commonly used Fibonacci based TA... we're seeing the manufacturing in Spain Italy and GB decline further. and it's not healthy taken that the summer season is just around the corner. in a healthy environment we should be seeing increases in orders, increased hiring and so on. we do see it in the USA, but at the same time we see more tensions in the EU.
Cyprus was practically pushed into a grave. the EU showed its total indifference to a country that was supplied with foreign money, namely the Russian money. and the EU very quickly decided not to bail out the Russians and even steal up to 60% of their deposits labeling them as mafia money. well, the ECB had no problems with Cypriot banks taking that money in and made no attempts to warn people about the coming collapse. the ECB did absolutely nothing to prevent this chaos. and now they think they are very smart to steal the Russian money and bailout Cyprus with the European money, but they don't realize that they've given the precedent that no country in the EU is safe from deposits cuts. in some sources it is said that several billion euro was removed from an Italian bank in a few last weeks...
so, back to the SnP - it looks like the market has entered a marasmic mood. the world practically ignored Cyprus and now that the bailout was issued and the depositors' problems became very local and insignificant on the global scale, it looks like the SnP will want to continue to grow by the scenario number 2 on the graph to the levels of 1650.
however - i would only allow a two week period for this scenario to come true because the May sell off is much more likely to start in April due to numerous fundamental factors.
the best investment one can do right now is buy US dollar. i hear a lot of talk about gold and other metals - these are bubbles and ultimately are NOT means of exchange. gold will fall down just like any other equity unless there is demand for it. but as the FED runs out of bullets and paper money become more and more valuable nobody will want gold which they cannot sell, but everybody will want to own legal means of trade - which is money. the FED cannot lower interest rates any further, cannot print forever because the cost of printing is rising, the cost of borrowing will rise and the national debt will rise ultimately pushing the demand for USD higher. taxes rose twice this year already. it means less money on hands of the public and that in turn means less spending. look at Walmart's latest sales report - they call it a disaster...
we are again balancing on a knife's edge because the banks that made investments in 2009 or later will see this gloomy picture and will want to take profits before another bank does. if one big player exits at any point in time now it will start a chain reaction. and i believe we're very close to this event happening...
so, within about 2 to 3 weeks i urge investors to exit the market, invest in the USD or go short on stocks. especially European, Japanese, Chinese, Russian and US stocks...
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