Ichimoku Cloud Shows S&P 500 to Keep Rising: Technical Analysis

(Bloomberg) -- A Japanese charting technique flagged the first buy signal for the U.S. equity market in six years last week, a sign that the steepest rally since the 1930s may last, Dolmen Stockbrokers said. The Standard & Poor’s 500 Index rose above the top of the so-called Ichimoku Cloud, according to the weekly Ichimoku chart, which analyzes historical highs and lows. The last time this occurred, the benchmark surged 62 percent from June 2003 to a peak of 1,565.15 in October 2007.

There’s “no more cloud cover over the S&P 500,” Cilline Bain, a Dublin-based technical analyst with Dolmen, wrote in a note yesterday. The breakout is “implying a major shift in the long term trend.”

The S&P 500 has rallied 57 percent since a 12-year low in March amid signs the recession is easing. The advance pushed the index’s valuation to 20 times the operating earnings of its companies from the past year, the most expensive since 2004, according to data compiled by Bloomberg. “We do acknowledge that the current pace of ascent is unsustainable, and at some stage there will be a retracement back to cloud support,” Bain said, adding that the index is unlikely to fall below 1,008. It closed at 1,064.66 yesterday.

Recovery, Dollar Buoy Commodity Prices, Morgan Stanley Says

Commodity prices may be supported in the medium-to-long term on a recovery in the global economy, a weak dollar and investment demand, Wang Qing, chief greater China economist at Morgan Stanley Asia, said today.

The recovery, while “tepid” at the moment, may gain momentum through 2013 and bolster energy and metals, which are closely related to growth, Wang said at a forum in Shanghai.

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China Said to Consider Buying Gold From IMF, Market News Says

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M&A Boom Signaled for S&P 500 Index on Record Cash

Never before have U.S. companies piled up cash faster compared with interest costs than they are now, setting the stage for a surge in mergers and acquisitions.

As the economy emerges from the worst recession in 70 years, cash flow may rise from the $1.5 trillion reported by the Commerce Department for the year ended in June, according to data compiled by Credit Suisse Group AG and Bloomberg. The amount reached a record in the past 12 months amid the biggest wave of firings since World War II and central bank interest rates near zero percent.

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Hedge Funds, Historians Are Winners of Recession: Matthew Lynn

That’s it, then. The global recession is over. At least that’s what Federal Reserve Chairman Ben Bernanke says. Answering questions last week, the world’s most powerful central banker said the U.S. recession was “very likely over at this point.” Much the same story is being played out in the rest of the world, with the German, French and even U.K. economies gradually recovering from their own slumps.

And yet the biggest shock to the global financial system since the 1930s won’t just leave us with a legacy of lost output and higher unemployment. The recession will reshape the way we think about the economy for a generation. Over time, we will see that the credit crunch caused shifts of power and influence between industries, professions and countries.

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Week Ahead: Stock Market Still Trending Higher

The trend for stocks continues to point up and could stay that way through the end of September, even if there are some choppy days.

Increasingly, traders have put aside talk of an imminent pull back and talk more about how fund mangers, who may have been underweight, are being forced to add to positions going into the end of the quarter. That, combined with a lack of selling pressure, has been keeping the stock market buoyant.

Many funds are benchmarked against the S&P 500, which is up more than 16 percent quarter-to-date.In the week ahead, investors are watching the Fed's two-day meeting; fresh housing data, and the Treasury's auction of more than $200 billion in notes and bills. There will also be a lot of focus on the activity of world leaders, who meet first in New York for the UN General Assembly, then at the G-20 in Pittsburgh. President Obama meets Tuesday with China President Hu Jintao, and also with Russian President Dmitry Medvedev and Japan's new Prime Minister Yikio Hatoyama during the General Assembly.

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