On December 6th, US stocks, with the wind of a strong USD at their backs, poked their heads above their lows of 2009 for the second time this year. The previous attempt was short lived… Will this one fair better?
After the 2008-2009 crash bottomed on March 6th, 2009, the S&P 500 quickly bounced from a low of 22.7 grams to about 30 grams. Until July of 2011, it traded in a range between 24 and 35 grams, gradually trending lower. On July 1st, the index peaked at 28 grams and began falling, passing the 2009 low on August 4th. and trading as low as 18.6 grams, 18% below the 2009 low. It has stayed below the 22.7 gram level with one brief exception: on October 18, the S&P rallied to 23.4 and held above 22.7 until October 31, peaking at 23.6 grams, 4% above the 2009 low.
Let's see if this rally can carry the S&P above the 23.6 gram level. If so, a further rally to 26, 28 or even 30 grams area might be possible. Even these levels are well within the downtrend channel established since 2008, however. A lot hinges on the news coming out of Europe, and how it impacts investor psychology. With limited upside, and lots of downside, I would rather rely on solid gold than risk my wealth on animal spirits.