DaytraderForecast.com Forecasts Top in the S&P500.

What a year! So far in 2009, the financial markets have stunned economists and traders with an impressive 50+% rally from the lows back in March. This amazing bounce has been the result of performance chasing by hedge funds and traders which in turn created the mother of all short squeezes in the indexes as well as individual stocks. Think AIG, Citigroup, Fannie Mae, Las Vegas Sands, the list goes on.

In these volatile and uncertain times, one thing became clear…. that technical analysis trumps fundamental analysis. As home prices continue to fall, foreclosures continue to climb, and the unemployment rate continues to rise, how can the market go higher? Or better yet, how can one forecast or predict these irrational moves? The answer… Technical analysis!
Technical analysis focuses not on corporate earnings, economic reports, or macro factors, but rather the physical supply and demand of a specific security (ie: stocks/futures) Technical analysis will tell you if the big boys are buying or selling. You will see what they are doing, not what they are saying. It is important that all investors and traders have access to a good charting software.

With the markets falling to extreme oversold conditions in the first quarter, we now find ourselves at overbought conditions according to the charts. Bears have retrenched or joined the bull march higher by force. The question on everyone’s mind is when a correction will occur. Everyone has heard the saying “The markets can stay irrational longer then you can stay solvent”… Which is true… however, we won’t accept that for an answer in this article.

We sat down with DaytraderForecast.com, Wall Streets’ largest stock forecasting firm, and asked them where they see the markets topping out. DaytraderForecast.com mainly focuses on intraday, short-term stock and futures forecasts that are used by leading hedge funds and proprietary traders. However, in this article, they gave us an exclusive report on their longer term forecast for the S&P 500, the most widely tracked index.

DTF gave us levels of resistance above the current market price for the S&P500 where they believe hedge funds and institutions will start selling, causing a market reversal. Self-directed investors and traders should take note and mark their charts because DTF has been one of the few forecasting firms to successfully call the top on the S&P500 in October of 2007.

According to DTF, the 3 resistance levels above the current market price for the S&P500 (futures) are: 1082, 1130, & 1180

Picking tops or bottoms in the market can be tricky. And despite the old sayings‘, “don’t try to catch a falling knife“, or “don’t stand in front of a moving train“, tops and bottoms do still occur. “Finding the top” will be a recurring topic on many news outlets, blogs, and financial forums in the coming weeks, and you will hear many opinions. Keep in mind that history has already proven the fact that fundamental analysis should not be included in finding a top or bottom. Be a skeptic when you hear a TV commentator calling for a top. Instead, focus on physical supply and demand for the security by observing price action on your charts. Remember… your chart never lies!