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Why the S&P 500 and Gold Rallied in the Face of Negative News

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And shockingly, for most retail traders, last week produced a very strong return for US equity indexes as well as risk assets in general.

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The amount of negative news that we have seen recently has been mind-blowing. Europe is going into recession, Greece and several other countries are on the verge of bankruptcy, the Middle East is a powder keg, and the US is facing a fiscal cliff. Shockingly, for most retail traders, last week produced a very strong return for US equity indexes as well as risk assets in general.

Retail investors oftentimes consistently lose money because they focus on the financial media and all of the negative news that is out there. Trust me, as a longer-term trader and investor, there is never an absence of negative news or potentially poor economic possibilities. This is not to say that markets cannot decline, investors just need to understand that markets are cyclical in nature and do not ever move in a straight line.

Based on what I was reading from most of the financial blogosphere recently, you would think that the entire world was about to end. A few blogs were calling for an all out collapse late last week or a possible crash this past Monday, November 19. As is typically the case, the market prognosticators were wrong with the calls for a crash or an absolute collapse in financial markets.

Unlike those blogs, my readers were getting information indicating that we were expecting higher prices. I try to cover a variety of underlying assets from the S&P 500 Index (INDEXSP:.INX) and oil futures, to gold and Treasury futures. My focus is purely on analysis of various underlying assets across multiple time frames. I cover intraday time frames as well as daily and weekly swing time frames throughout the week.

To put into perspective what I was seeing in the marketplace on Monday November 19, I sent my readers the following chart during intraday trading that day.



As can be seen above, the target we were expecting was at the top of the recent channel. As shown directly on the chart above was my comments that if the 1,410 level on the S&P 500 Index could be taken out to the upside, the bulls would have an opportunity to move prices higher into the end of the year. The daily chart of the S&P 500 Index after the close on Friday, November 23.



As can be seen above, the S&P 500 Index moved right into the expected target price range and closed literally at the very top end of the range shown above. If prices move considerably higher, the bulls will have broken the descending channel and higher prices will likely await.
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No positions in stocks mentioned.
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