Tue 25 Jul 2006
Not to be confused with the 1957 film of a similar name, this post describes some of the analysis I’ve done?on the cash S&P 500 which I’ve been ignoring for no good reason other than it’s fun to say “Dow”.? Dow.? Dow Dow Dow.? HEHEHEHE.? But you might find the plot of that movie to be right on target.
Anyway, it became clear in a density analysis that the S&P 500 has really had 3 “real” prices or values since the recent 2003+ bull market started.? These prices are, approximately and in order of occurance, 1125, 1189 and 1261.? Around these prices, the S&P created 3 very well-formed and successive bell curves.? The boundries of these bell curves are approximately 1060-1161, 1130-1246 and?1212-1326 respectively.? When I say these are the only “real” prices, I mean that as a simple way of expressing the idea of consensus value.? For all intents and purposes, the SPX bottomed in 2003 and then went to 1125, then 1189, then 1261, all else being tantamount to negotiation.? Right now we are dealing with the 1261 price and at the moment there is no activity occuring that falls outside a long established distribution around this number.? Thus, the market is technically sideways within a longer-term bull, though those kind of labels are always relative to the frame you are looking at.? I also should point out that nothing in this current battle for value looks any different from the battles around 1124 and 1189 when viewed outside the world of barcharts, each one leading to higher prices later.? Sideways is not a popular theory right now since directional picks by your favorite guru are always better headlines.? But back to the point, this information might be useful to you in?developing?your investment tactics.