Breakthrough sets new target for S&P 500

After coming out of a 5-month reverse head-and-shoulders pattern, a high for the trend has been established.

By InvestorPlace Jan 18, 2013 3:28PM
Stock market copyright Zurbar, age fotostockBy Sam Collins

iplogoOn Thursday, stocks opened higher on better economic news, a possible new stimulus plan in Japan, and apparent progress in reaching a debt-ceiling agreement. The early gains continued for most of the day as buyers were encouraged by better-than-expected housing starts and higher building permits in December. At mid-afternoon, a lower-than-expected Philly Fed regional manufacturing index for January cut into the rally but failed to have much impact on the close.


By Thursday's close, the Dow Jones Industrial Average was up 85 points to 13,596, the S&P 500 rose 8 points to 1,481, and the Nasdaq was up 18 points at 3,136. The NYSE traded 709 million shares and the Nasdaq crossed 389 million. On the Big Board, advancers beat decliners by 3-to-1, and on the Nasdaq, advancers were ahead by 2-to-1.


SPX Chart

Click to Enlarge


Trade of the Day Chart Key


We can finally say with supporting evidence that the S&P 500 has broken free of its five-month reverse head-and-shoulders pattern. The initial target of the break is the round number of 1,500, but as explained on Investor Place's Jan. 10 Daily Market Outlook, "If the neckline at 1,466 is broken on a close, and with greater-than-average volume, a new high for the trend will have been established, and… the target would be at about 1,589."


Therefore, my target for 2013 is S&P 500 at 1,589 or higher.


DJI Chart
Click to Enlarge


Since the breakout of the S&P 500, all eyes will be on the Dow Jones Industrial Average. On Thursday, it came very near to closing higher than its five-year closing high at 13,610, and even penetrated it with an intraday high of 13,634.


A break of the old closing high and the peak high at 13,662 would trigger a Dow Theory confirmed "buy," since the transports broke to a new high several weeks ago (see Jan. 16 Daily Market Outlook on Investor Place).


Conclusion: The breakout of the S&P 500, along with a strong move against resistance by the Dow industrials, is strong evidence that the bull is back. We may have wished for more volume and breadth, but with the majority of public investors still non-believers, we may not see an increase in volume until later in the year. The strongest sectors continue to be: financials (though down Thursday), industrials, technology, housing and materials. Investors and traders should focus on these areas.


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11Comments
Jan 19, 2013 1:13AM
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The Market naturally rises to compensate for the deflation of the value of a dollar. So the result is higher floors and stagnant real wealth. Yes we are making money but it is buying less and the actual increase is tempered by inflation. 
Jan 18, 2013 4:46PM
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how about a pullback to 1350 first?
Jan 20, 2013 5:36PM
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Nice to read somebody that isn`t bearish for once.Most people act like the market

has dropped 80% in four years when in fact it`s up 67.4% before dividends.

Jan 20, 2013 1:50PM
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RIA........Yeah thanks for the post...Informative to myself and others that want/should take time to understand...imo.

 

I'm not a bond investing type guy, but we do have safer savings in other instruments, CDs ,etc.

Material items, such as collectibles, maybe precious metals and real estate, can give a person/people solace also..I kinda think diversity can help anyone build savings,security and wealth...

After all I think it was Lincoln or another well known that said; "Under All is the Land."

Wife thinks all of my incursions into Wall St. are just what they are, gambling.

And only numbers on a Computer...They are hardly.

 

Knowing that we should probably have considered a portion in to some types of Bonds (as recommended for our age) just never have....Except when we had a broker or FA...

And don't today....But might still look into or consider, and I'm sure it would be some type of Fund or ETF, that was well balanced and managed well....?

Jan 19, 2013 2:54PM
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Not being a "complete perma-bull" I do picture some sort of correction...

 

But as some might call "bubbles", It is not apparent to me that we have, what I call any Sectors in that mode....

Oil may be overblown...But that deals mostly with supply and demand, sometimes seasonal usage.?

Not to discount manipulation factors..

Tobacco is at all time highs...But Companies that perform and produce sales and earnings, shouldn't really touted as, out of the ordinary.

And Tech is tech, with sometimes just a few players, controlling an Index; ie; Apple,etc.

Housing and Home Improvment are in upsurges, but coming out of a "housing debacle" that is somewhat understandable, but possibly not sustainable.?

 

And Banks along with Financials some having "hoards" of cash are just that, with unknown factors still in their backgrounds?...They have become "a hard nut to crack."

 

With Companies making their numbers; Sometimes with "lower expectations", but still in long-term increasing uptrends....I do not share the D&G or thoughts of a "Major Downturn."

Corrections maybe??, which are healthy for all Markets...

 

Looking at maybe the low/mid 1350-1375(S&P), but do not see worst on the horizon....IMO

The DOW can correct about 300-500 any one day of a week...But to fall back to say, 12,500 may be the worst we could see for awhile...

If the Scenario of a "double dip" Recession presents itself, then all bets would be off...

I really doubt that could take hold for any length of time,and would rather bet on Inflation first..IMO.

Jan 19, 2013 11:53PM
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Had a thank you for you RIa , but it did n;t post a few hours back.....So maybe try tomorrow...

Just got back from Clubs.

Jan 20, 2013 3:16PM
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tog:  Bond=coupon amount/price. This is the simplest way I understand them. If the bond goes down in value the yield goes up. If the yield goes down the bond value goes up. I think?  I never have been in bonds so I think this is right.
Jan 19, 2013 4:57AM
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2000 = 12 month peek to 1500s & pullback to 900
2005 = 17 month peek to high 1500 & pullback to 700
2013 = 17 month peek to high 1500s to date & no pullback!! Rather a head & shoulders breach-thru!? 
Try to 900 min. in next 3-6 months
Jan 20, 2013 10:33PM
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Yeah I was/would mention, depending on Indices and of course Equities....?

 

We have had some gains of much more then 67%, since Obama took office...

 

But then again, we came from the depths of Hell..... 

Jan 20, 2013 9:49PM
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Kinda think middle of the road, dosages of optimist and pessimist plays stand a better chance at success....(limopat...You appearing as someone else?)

But I prefer to be the Bull that hooks the Bear, and tosses him over the fence...

 

Gold near 1689 on spot market...Survey participants agree with me, for 1700 range next/this week..

But only $11 bucks short on earlier trades...wahooooo!!

Asia mixed with Japan down early.

 

RIA.; Have several positions similar, but no TIPS.

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