The State of the Trend
Last week the daily trend turned down, while the weekly and monthly trends of the three main US indices (DJIA, NDX and SPX) remain up.
Apparently, GS is the only investment bank on Wall Street that didn't get the FED's memo, that stock prices have reached a permanently high plateau, and that from now on no declines will be allowed whatsoever. In their monthly chartbook they came up with a 1275 forecast for the SP500, as reported by Seeking Alpha.
Since we subscribe to the "Trust but Verify" school of thought, we decided to double check, and it turns out they got it right. Should the monthly SPX drop below the pivot line at 1362, the next support comes in at 1276.25, to be exact.
Next, we took a look at their 20 most and least recommended stocks, and sorted them according to their monthly risk/reward and trend ratios. The end result (published on my blog) shows that their recommended stocks have on average a much higher Risk/Reward ratio of 89.5 v 56.5% for the stocks to be avoided, and on average are more overbought as well: 73.47 v 4.24%.
Let's hope they got the fundamental picture right.