S&P 500 Index Forecast for 2012

Note to Investors: The few cheerful days of December seem to have erased the pain of November. December has historically been a positive month, and maybe this year 2011 sticks to the trend. However, there are no guarantees for 2012. If the S&P 500 index goes down from here, due to various negative news in the new year 2012 from within the USA and from the global economy, then the major supports are at the following levels: 1110 and 1000. Investors can buy at these levels, and sell with 10-15% gain on recovery rallies.

Below 1000 level, the only trade will be on the short side. Investors also should wait for S&P to come above 1000 before making major investments. Below 1000, there is 50% probability of retesting 666 — the low made on March 06, 2011.

If things become positive globally by end of 2012 (looks unlikely, but still possible) — with EU solving their problems in a neat way, the US fiscal deficit reducing along with reducing unemployment in USA and Europe, investors exiting gold and moving into real estate, etc — then S&P 500 can move up to our upside target of 1666.

There is something special about 666. It appears in both the downside and upside targets! It will be very difficult to pick the sectors that will take the lead. Therefore, consider using the S&P500 Index ETF (symbol: SPY) to move through the volatile times ahead in 2012.

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