It has been a tough year for traders and investors alike, however when you think about it it has been an incredibly tough decade.  Despite great progress in products and business the US Markets have been great under achievers.  The Bush years have not been kind.

Take a look at the chart below here I use a quarterly line chart of the SP-500 using Bollinger Bands and Parabolic SAR.

The Bollinger bands highlight to us exactly how fantastic the 1980`s through to the year 2000 was.  130 points on the S&P to approximately 1300 at the end of 1999.  That is a Ten Bagger or 10X Growth or 1000%.  In many ways we are still paying off those 2 decades of spectacular growth.  Let’s face it, for those in the “Western World” our lifestyles have changed immeasurably during this period.  Everyone on average increased their standard of living especially in Europe & North America.  But what happened to the rest of the world, Africa, Asia, South America.  Well the last 20 years of the 20^th Century was not as kind to them.  However, the next decade will change this.  China is already a raging powerhouse economy, Brazil is staking a strong claim on the world stage, India is a technology leader, from the Philippines to  Malaysia, those that can create a good environment for business will prosper.  This is good for the world.

Freestockcharts.com chart courtesy of Worden Brothers, Inc.

So what do the US markets have in store for us because today, the world most powerful economy is still the US.  The last decade has essentially bought “buy and hold” investors nothing in all major indexes in the US. In the chart below we can see we are now at approximately 1998/99 levels in the S&P-500.  We have just crossed vigorously through the lower boundary of the Bollinger Band which suggests now we can safely “assume” a move towards the upper band in the coming years.  The parabolic SAR (Stop and Reverse Indicator”, suggests we are now significantly into the start of the new bull market.  I have written numerous times that we should expect the Second Leg or “Wave” in 2010.  But how far can we go, and when should we expect resistance encountered in the huge Double Top of 2001 and 2007.  Following the same trajectory of 2003 to 2007 I expect to see a new high somewhere near the end of 2011 to mid 2012.  Of course this could change is the US faces further external shocks.

Below we see the same Chart for the Chinese SSEC-X the Shanghai Stock Exchange the 2^nd largest exchange in the world.  Whereas the SP-500 hit a 13 year low and lost 50% of its value, the SSEC hit a 3 year low and lost over 70% of its value.

Freestockcharts.com chart courtesy of Worden Brothers, Inc.

I fully expect both the exchanges to move higher in the coming years.  The question is what is the potential upside.  The S&P will see resistance at 1500, with a potential upside of 35%.  The China SSEC could recover to it 2007 high to register an 80 to 90% gain.

With the Business Fundamentals still in place “Low Interest Rates” for example, whether you invest in India China or the US, the next 1-3 years should be promising.  Good luck with your trading.

Barry D. Moore , MSTA

Society of Technical Analysts (STA)

CFTe Level II Certified

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