My Prediction for the S&P 500 Year End 2012 is….

• Posted by Greg Harmon
• on December 30th, 2011

…..useless. Well not entirely useless. But unless you are a buy and hold investor and will not look at or adjust your position for another year it is at best a guide of sentiment. Those of us that live and trade the markets daily know that that even if the prediction comes true you could make twice as much or lose it all while you trade. That is because your performance is path dependent, the movement throughout the year matters.

I use the longer term charts as a guide to view which way the market is leaning, but then trade what I see either on a daily or weekly chart. With that in mind let me build the case for the S&P 500 SPDR, $SPY, to reach 165 in 2012 using the monthly charts and several analytical techniques.

S&P 500 SPDRs, $SPY, Point and Figure

Starting with the Point and Figure chart above, it has a bullish price objective of 170 on a 3 box reversal with a 2 point box size. It would take a move down to 116 to negate this…

S&P 500 SPDRs, $SPY, Elliott Wave

Above is one possible bullish Wave Count for the $SPY. The 1993 – 1996 area can’t be relied on too much as there is theoretical history prior to it, but if you agree with the a-b-c corrective wave then the end of Wave I cannot go beyond 143.69 where 5 would also be posted. At that point a Wave II corrective phase can take over which would be limited in downside to 110.60 before Wave III higher looking to exceed 191.30, assuming Wave 1 takes its full limit and Wave corrects to the limit. From the time it has taken for the first 4 waves of Wave I it would suggest a limit of 143.69 in 2012…

S&P 500 SPDRs, $SPY, Andrew’s Pitchfork

The Andrew’s Pitchfork also suggests a long term move higher as it glides up the Median Line of the bullish (green) Pitchfork and approaches the Hagopian Trigger Line (red dotted) signaling a break of the downward bearish (red) Pitchfork and long entry point. From there a range of 135 on the low side to well over 200 is possible…

S&P 500 SPDRs, $SPY, Fibonacci’s

The Fibonacci chart above shows that after retracing 61.8% of the down move it pulled back just under 50% before moving up and then pulling back to the 61.8% level again. Now rising off of that base and along the Fibonacci Fan line it looks poised to retest the high at 143.64. If it stays along this Fan line then it could reach about 165 by year end and if it falls to the next lower fan along the it would suggest a rise to 141.00…

S&P 500 SPDRs, $SPY, Trend

Finally, using traditional trend lines and indicators, the $SPY is getting squeezed between a downward resistance line and an upward support line. Currently rising it has a bullish Relative Strength Index (RSI) and a Moving Average Convergence Divergence (MACD) indicator that turned slightly negative but is holding and looking to reverse. Both would support further upside. If you will grant me a little creative license that the financial crisis caused an overshoot of the dotted trend line extended back then it is heading to the top of a long symmetrical triangle. A break above would have a price target of about 200. If you are strict then shorter triangle with a target of about 175.

So five different price targets or ranges but all higher. If you assume that the Point and Figure target is met in 2012 and use the mid point of the ranges from above, and then average the 5 you get a peak at about 165 or about 30% above current levels. It could happen or not, but I have 5 tools that tell me the long term bias is to the upside so that is what I will be playing. That’s my analysis, what does yours tell you?

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