Knocking at the door… and speculating about what’s on the other side of it…

0228spx

http://stockcharts.com/h-sc/ui?s=$SPX&p=D&yr=0&mn=6&dy=0&id=p16768279576&a=214966864

 

After a paroxysm of fright occasioned by the emergence of the zombie Berlusconi from the political grave the market promptly recovered its senses and took back lost ground.  As we approach all time highs we naturally encounter resistance.  That is the nature of the market.  Highs and lows represent psychological barriers.  We often see prices back and fill at these points.  So maybe it wasn’t all Berlusconi that spooked the market Monday.  It may have been partly fear of heights.

The potential heights are somewhat daunting.  Here is the PnF chart with a price objective of….1800?  yes, 1800.

0228spxpnfThis may not seem like nosebleed territory if longer term readers remember our letter of  April 2012 (http://www.edwards-magee.com/?p=3430) in which we used our magic calculator to compute the rule of seven on the first wave out of the wipeout of Aug-Oct 2011.

0228spxrule7

http://stockcharts.com/h-sc/ui?s=$SPX&p=D&yr=1&mn=9&dy=0&id=p12943547640&a=254727527

 

As you can see the ultimate price target computed by the rule of seven was 1837.  Honestly, we don’t make this stuff up.  We just throw the Tarot cards grab a little medical ciggie and read the results.

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