Profiting in this Market: Rely on Technicals or Fundamentals?
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September 17, 2010

*****You Shall Not Pass!
*****Technical vs. Fundamental
*****How to Profit Now

Fellow Investor,

The S&P 500 is at a very interesting spot. On Monday, September 13, it gapped up and ran above resistance at 1,120. It's dipped below that level every day since. But the bulls have rallied and closed the S&P 500 above 1,120 every day.

The S&P 500 is consolidating recent gains above an important support/resistance point.

This is exactly the kind of action I like to see. And the trading floor guys and the talking heads on CNBC are all buzzing that this rally might have legs, these gains might stick.

But then, maybe you glance at 6-month chart for the S&P 500...



The rally from the July lows made it to 1,125, too. The bulls managed to keep it there for 6 days after the initial breakthrough before they finally succumbed. The S&P 500 fell 85 points to 1,040.

The rally off the early June lows made a run at 1,125, too. In fact, the S&P 500 made it all the way to 1,131 on June 21. But it didn't even spend 6 hours up there, let alone 6 days. The S&P 500 closed at 1,113 that day. By July 1, it had touched 1,011.

Clearly, 1,125 has not been kind to the S&P 500 lately. I hate to show my geeky side, but 1,125 has been like Gandalf standing on the bridge of Khazad dum facing down the dreaded balrog. "You shall not pass!"

This time, however, I think the S&P 500 has a good chance of making it through 1,125. And the reason is data...

*****Manufacturing data hasn't been great. In fact yesterday's Philadelphia Fed survey of manufacturing strength in that region was downright ugly.

But new unemployment claims have been better than expected for three weeks running. Retail sales have improved, consumer spending is hanging in there, new capital requirements from Basel III could have been worse, and earnings from Oracle (Nasdaq:ORCL) and much maligned Blackberry maker Research in Motion (Nasdaq:RIMM) were better than expected.

On the political front, a bill to help small businesses is likely to get Congressional approval, the Obama administration is finally getting serious about the economy, and the potential for a Republican majority in Congress is being pitched as bullish for stocks.

Apple (Nasdaq:AAPL) is getting more love as iPad shipments to Latin America and China are starting. Cisco (Nasdaq:CSCO) just announced it will start paying a dividend.

*****S&P 1,125 may be a technical level. But the reason the index may move higher is purely fundamental. I know many investors don't want to hear it, but the economy has improved to the point that Warren Buffett has declared a return to recession out of the question and PIMCO is betting against deflation.

Financials and technology have been leading the charge. And if financials can get it together after a couple days of losses, we'll go into the weekend with 1,125 in the rear view mirror.

*****Like I told you yesterday, trading strategist Jason Cimpl, of TradeMaster Daily Stock Alerts' fame, is looking for the S&P 500 to rally to 1,172 over the next few weeks. And he's getting his readers positioned for upside gains.

I can't tell you what he's buying, that wouldn't be fair to his legion of paying subscribers. But you can learn more about how Jason keeps his readers turning consistent profits HERE.

As always, let me know what you're thinking: ianwyatt@wyattresearch.com.

Have a great weekend,

Ian Wyatt
Editor
Daily Profit





Posted 09-17-2010 10:16 AM by Ian Wyatt
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