Reasons to Look for a Rise This Week

Here are some factors that are likely to influence the stock market's movement in the week beginning today, Jan. 12, 2009:

• The market usually makes an interim low on the Thursday or Friday a week before option expiration, which occurred last week, therefore it may indicate a rise this week.
• The S&P 500 option put/call ratio for options expiring this coming Friday that are priced over $50 is at a weak 3-to-1 ratio, and open interest is lower than in the two previous months. This indicates that the stock market is not under a lot of pressure to go lower into this week.
• The S&P 500 futures contracts per the Commitment of Traders report released Friday afternoon shows that commercial traders (or "smart money") have covered a large amount of their net short positions. This indicates less selling pressure on the market for the coming week.
• The Dow Jones Industrial Average futures contracts per the Commitment of Traders report shows that commercial traders have moved to the largest net long position since mid-September 2008. This indicates a bullish bias in the Dow Jones average.
• The Stock Trader's Almanac indicates a week of mostly up days.
• Moon cycle: The market has a high probability of reversing direction within a few days of a full moon (this kind of analysis is known as the delta theory). The markets sold off the last two trading days into the full moon, which occurred Saturday night, Jan. 10.
• Money usually comes into the markets at the beginning, middle and end of the month. We are entering the middle of the month.
• The slope of the S&P 500 futures contract (and corresponding cash index) 40-day simple moving average is flat and is most likely to turn positive if the market closes higher on Monday or Tuesday. That would be the first positive slope since August 2008; this can indicate a bear market rally that could last a while.

Our 2009 prediction:

After reviewing each year ending with a 9 going back to 1909, we are predicting a tremendous similarity to a pattern that seems to exist at the end of each decade. Almost all years ending with a 9, except 1949, show a pattern that indicates a steady first half of the year with a low in the third week of February moving higher into the first week of May. Then another low appears in the last week of June with a rally into late August.

After the rally into the last week of August, these years predict that the markets takes a major selloff that may last into late October or longer. Current analysis has me concerned about a predicted selloff after August. If this does occur, then the long-term, 40-year cycle low for the markets is on target to be in mid-2010.

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Know What You Own: In early trading on Monday morning, the biggest percentage gainers included Advanced Med Optics (EYE - commentary - Cramer's Take), EnteroMedics (ETRM - commentary - Cramer's Take), Medical Nutrition USA (MDNU - commentary - Cramer's Take), Human Genome Sciences (HGSI - commentary - Cramer's Take), Sussex Bancorp (SBBX - commentary - Cramer's Take), CVD Equipment (CVV - commentary - Cramer's Take) and Targanta Therapeutics (TARG - commentary - Cramer's Take).

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Daniel S. Shaffer is president and CEO of Shaffer Asset Management. He has been in the securities industry since 1983 -- he started his career in January of that year as a floor trader for his own account on the New York Futures Exchange. From 1983 through 1989, he worked with such firms as Bear Stearns, Coopers & Lybrand (now known as PricewaterhouseCoopers) and Hambrecht & Quist (now owned by JPMorganChase). In 1989, Shaffer became an independent financial planner and money manager. In June 2000, he decided to focus on money management strategies; he has since managed money utilizing stocks, futures and foreign exchange for individuals, major institutions and for his former hedge fund.