After the monster year stocks posted in 2013 the general malaise of 2014 so far feels like a disaster. For the record, as of Friday afternoon the S&P 500 (^GSPC) is essentially flat, down less than a half a percent. While that’s certainly a nice recovery from the more than 5% drop that reversed on February 3, it’s hard to reconcile the endless debate over bubbles with the fact that stocks have spent the last three months doing pretty much nothing.
In the attached clip Bill Baruch of iiTrader says investors should keep adding to their long positions on pullbacks. “We’ve been saying buy the dips for about two years now,” Baruch explains. In addition to a decent uptrend, Baruch says the moving averages are in bulls’ favor and the Fed isn’t going anywhere. That may not sound like much but it’s a thesis that’s been working pretty well for the last few years.
That mild enthusiasm aside, Baruch says stocks are more or less fair valued at about 1,850 on the S&P 500, pretty much where they are right now. Not that fair value and the actual price level of stocks always move hand in hand. Baruch is a technician. To him it’s about trading patterns and looking for history to repeat patterns. From that vantage point he says the S&P making its way to 2,000 could be in the cards, though that mark could prove to be stiff resistance.
In terms of the trading set-up, a move to 2,000 would mark an 8% gain from current levels. He sees support on the 50 day moving average at about 1,829 and the 100 day moving average near the 1,800 mark.
Strategically that gives investors a few different options. As always, doing nothing tops the list. For traders buying support at around 1,800 and using somewhere in the high 1,700s as a stop-loss and trying to play the range between there and 2,000 could be a way for more aggressive players to try to grind out some gains.
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