Comments on: Update on SRS Outlook

By: MyLifeMyTrade

MyLifeMyTrade — Fri, 19 Jun 2009 17:21:17 +0000

The problems – real estate bubble, toxic assets, shrinking credit, growing US debt – which led us to the March lows have not been addressed. In fact, they are only getting worse. That is why we will at least revisit the lows.

Why we go higher – that is not so certain. But it seems that we haven't reached the pinnacle of optimism yet. So, we must go higher.

By: A

Fri, 19 Jun 2009 16:37:25 +0000

Thanks!

I'm trying to understand why everyone feels that the lows WILL be taken out. What can take us to 1200 and why are many saying there will be a crash in the fall?

By: MyLifeMyTrade

MyLifeMyTrade — Fri, 19 Jun 2009 04:09:38 +0000

You are welcome.

For SRS to hit 30, SPX will have to head down to below 850. SRS moves 2x IYR… and typically SRS moves 2x SPX. For SRS to hit 30, it has to move up 33%, which means an 8% move down in SPX –> this takes SPX below 850.

I have a hard time seeing SPX head below 860 region in the next few weeks, and that limits my SRS target to $27. Of course, this is not to say that it can't get there.. May be IYR drops a lot without SPX not dropping that much. And in that case, we might have SRS at $30 even before SPX hits 860 region. But based on my calculations, the odds of that happening are less.

As for the market testing 600.. my thesis is that we correct a bit, then head back up to 1150 – 1200 region and then correct from there.. 600 lows WILL be taken out.. probably sometime next year.. The decline would however start some time late this year (pretty much like last fall).

As for passing/sharing the love, you can do so preferably at the top of the page OR bottom of the page