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tried to move up, the market pulled itself back
down to its original position, stunting any progress
made during that time. And others looking at the
wave pattern between 2002 and the present might
say that the recent uptrend is the halfway mark
of
an evolving triple top. But
the recent strong show of support and the
amazing momentum established as the S&P 500
broke through those Fibonacci levels shows that
this bull will, in all probability, surpass the
double
top that has already been established (note the
highs of both July and August). Passing
the poison cup Most
recently, the Japanese glyph known as “the hanging
man” formed by the open, high, low and
close on 7/25 provided an opening for a new bear
market over the following two weeks. But the mar-
ket declined to bite on that poison pill. Instead,
it
recovered, and is now poised to overcome the
resistance established by the hanging man. When
all is said and done, the conflict between
facts on the ground and the evident life in the mar-
ket may indeed signal an impending personality dis-
order. It certainly is driving some “older” analysts to
the edge of distraction. But the adolescent bull
mar-
ket doesn’t seem to have a disorder at all.
And it’s
his road to drive on. Who am I to put stop signs in
front of him? He looks like he’ll run right through
them anyway. In
a nutshell: Go long the S&P 500 from current levels
(993.71) to the next major tension point at
1,083.40. Ride
the momentum
as long as you can If
the Fed is indeed pumping
more money into the market
each day, why not profit off it? At
first, it seemed like this
money-pumping scheme was
just a fad. But after four months
of watching the markets “buy
the dips,” I can’t help but won-
der whether the Fed’s pumping
plan has succeeded and
allowed— indeed
even forced— the
markets to turn the corner. Right
now, it’s too soon to tell. But it’s unwise not
to consider the possibilities, especially if there is
a low-risk way to capitalize on them. Adam and Ann
have both decided to go long the S&P 500 from
cur-
rent levels (993.71) to the next major tension point
at 1,083.40. The easiest way to profit off this move
is trading the S&P SPDR Trust (SPY:AMEX), com-
monly referred to as Spiders. The
SPRD, which stands for Standard & Poor’s
Depositary Receipts, is an investment trust estab-
lished to hold a portfolio of securities proportionally
comprised of the Standard & Poor’s 500 Composite
Stock Price Index. Naturally, the movement of the
SPRD directly corresponds to the performance of
the S&P 500. In
other words, Spiders are the S&P 500’s equiv- alent
of the QQQ index, but “pure” chartists tend
to prefer the SPRD because its underlying assets
are such a strong proxy for the broader market.
Better yet, the Spiders pay a quarterly cash divi-
dend based on the accumulated dividends paid by
the stocks held in the SPDR Trust, minus nominal
expenses. This dividend is currently around 1.529%. For
example, the top 10 holdings that make up
the SPDR are: General Electric (3.18%), Microsoft
(3.05%), Pfizer (2.99%), Exxon Mobil (2.66%), Wal-
Mart (2.61%), Citigroup (2.44%), Johnson & Johnson
(1.70%), American International Group (1.60%), IBM
(1.58%) and Merck (1.51%). The total allocation
of
these ten companies represents 23.32% of the
SPRD. The remaining allocations are comprised
of companies that break down into the following
sectors: Financials
(20.22%), information technology
(16.11%), healthcare (14.78%), consumer staples
(11.59%), industrials (10.40%), consumer discre-
tionary (10.17%), energy (5.76%), telecommunica-
tions (3.87%), utilities (2.97%) and materials (2.65%). As
you can see, owning the SPRD is the simplest
way to play an overall uptrend in the market, espe-
cially since any particular security is subject to sud-
den downgrading (viz. Intel’s recent punishment
despite its relatively strong Q2 profits). In
recent trading activity, the SPDR’s 52-week low
is 77.07 and the 52-week high is 102.17. As I write,
it’s currently trading for 100.77… and
looking to
trend higher. So let’s profit off this move. As
a play on the current upside momentum, buy the
SPRD Trust (SPY:AMEX) on dips under US$100
per share. A continued rally could push it above its
52-week high, possibly as high as US$109. For
updates on this play, stay tuned to both the
next few issues of Taipan and
your regular 247prof-
its e-Dispatch. SEPTEMBER
2003 Bryan
Bottarelli
