Momentum Rally Continues Says Market Timer Frank Kollar

October 23, 2009 (FinancialWire) (By Frank Kollar)

Both the S&P 500 Index (SPX), and its tracking ETF the S&P Deposit Receipts (NYSE: SPY) pulled back mid-week sparking several analysts to write that a correction was under way.

Though the stock market may be over due for a correction as well as overbought, this is a momentum rally and no one can know how far a momentum rally will rise. They get their fuel from emotions and bulls will trample each other right to the final high.

Thus Thursday’s early morning sell off did not surprise us when it reversed and the markets stampeded higher into the close, erasing almost all of the previous two day’s losses.

Admittedly, momentum rallies always have a bad ending, but that does not mean we should ignore their profit potential as they continue to rise.

For the SPY, the widely traded ETF that follows the S&P 500 Index, the 50% retracement for the entire bear market decline is only 2.5% higher, at $112.31.

For the SPX, the 50% retracement for the entire bear market decline is only 2.4% higher, at 1119.31.

There are many technicians calling for a reversal and correction at that 50% level. That could certainly be the case but until such a reversal actually occurs, the trend remains up.

The http://www.fibtimer.com ETF Strategy has a position in the S&P 500 SPYDRs.

Kollar is editor and chief analyst at FibTimer.com (http://www.fibtimer.com) which offers market timing strategies for S&P and Nasdaq index fund traders, as well as bond, gold, small cap, sector, ETF and stock trading strategies.

Kollar’s research has shown that the financial markets are in tradable trends approximately 80 percent of the time. FibTimer strategies define trends and trade them in both advancing and declining markets. Caring nothing about what newscasters say or what the latest economic indicator predicts, trends are where the profits are, and that is where FibTimer is.

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