We have been very optimistic about US market ever since December and we have been right that this earnings season kicks off to a great start. S&P500 has gained 35% since Oct 2011. It is now 1485 points, at 5 years high point since Jan 2008.
S&P500 all time high is 1576. Hearing from CNBC, it is reported that last week, 22 billion US dollars flow into equities, the largest inflow we have seen since 1992. You can see the bullish momentum in US market at its peak.
Chart of S&P500:
Having said that, this week is an important week to watch out for. We are entering into the important earnings week. 20% of S&P500 stocks will be reporting next week. So far, the industrials stocks have been doing extremely well with the good news from China's GDP.
Technological sector will be the focus in midweek with the earnings announcement of Google (on Tuesday after market close) and Apple (on Wednesday after market close). These 2 companies shall dominate the headlines in mid week.
Our prediction is that earnings will push the index higher but there will be a strong resistance at historical high, Dow is 14198, S&P500 is 1576. We don't see it breaking in these 2 coming months. Even if it breaks, the higher it goes, the stronger will be the pullback. When these festive earnings period dies down, so will the stocks positive momentum.
As we reiterate in the past, we expect a pullback in Feb or March. Our market sentiment indicator will tell us the timing of the turn. Study our market sentiment indicator closely. Now all 4 pillar sectors of US economy are in the bullish states. When one sector turns bearish, it is a warning sign that peak is approaching.
In the meantime, let us enjoy this bullish run. Don't short yet. Just minimise your positions going forward now.