Price projections assuming a run to 900, completing the right side of the head-and-shoulders before the next measured move to 780'ish.
If overhead resistance at 868 taken out in the next few trading days then we could move to 900 on short covering alone. Bear market rallies often end on good news, such as an inauguration. That's about all the good news, although some might view the Senate voting to release the remaining $350B of Tarpoilet Paper as good news. Chalk up another solved crisis for Barney Frank. Proud of my Senator Vitter for trying to get this stopped even if he was doing the honka chonka with the D.C. Madam at one point. Sell into strength.
The Bad (Intermediate Term)
Bear Wedge breakout could put 944 as the top in this correction. Since the November lows most (including myself) considered a rally to as high as 1060, a 38.2% retracement of the bear market. Unfortunately those pesky little numbers like Job Losses, Retail Sales and Real Estate kept getting in the way. So far the market has only managed to retrace to the first fib at 950. It appears we are headed down to the November lows sooner rather than later. Got Puts? This does not rule out the possibility of seeing 1000 on the S&P though, afterall REITards are still out in full force talking their book on TV. But for those of us with more than two firing neurons up top know that Commercial Real Estate is done, finito. I have and will stay short SPG, VNO and HCP until they all get a 50% haircut. Still though, never underestimate the power of stupid people in large groups. Therefore it's premature to rule out some sort of 'Obama-wan Kenobi' plan leading to irrational exuberance in the market. Sell into strength.
The Ugly - Get Short or Get TARP'd (Long Term)
I fully expect a single digit P/E on the S&P. It has did this only 9 times since the year 1900 and each time it breaks below 10 it stays there for a prolonged period of time. This has been the perfect storm and there is every reason to expect this scenario to play out. Even with a 10 multiple and $50 earnings that is a 500 price target. Gives a whole new meaning to the S&P "500". Got Puts? This may take months or a year, perhaps two. Heh, the Japanese stock market is sitting at 8,000 a mere 20 years after it topped at 38,000. Read that last sentence a few times then ask yourself that question, "Does the market always come back?" The housing bubble coupled with peak credit in a nation of 0% savings and all consumption plus a global recession = bad news bulls. Sell into strength.
Normally in this situation I would advocate a Long Divorce Attorney, Short Wedding Planners trade (both have Semi-Pro Ultra Long/Short ETFs). However, this time is different and me thinks people will be too broke to get married or divorced. Therefore I'm recommending shorting both.
