The Dow Jones Industrial Average recently reached our minimum price target of 8,500. Now it is running into resistance. I previously had stated that the rally could reach a maximum target of 9,500 before correcting. I am now fine tuning that target to 9,000 - 9200 or so.
The 200 day moving average is around 9,000 and the Dow's January, 2009 snap back hit the wall around 9,200. A move to those levels before a correction would be a positive development in the long term market picture.
On a seasonal basis, while nothing is written in stone, the market has historically formed some type of short to intermediate term top sometime between mid July and late August. September and October - when many equity funds fiscal years end - are the worst months historically.
Since many money managers will soon want to lock in their large profits, it makes sense to anticipate the seasonal factors this year.
In sum, on a percentage basis, The stock market has had a huge rally from the March 2009 lows. On the other hand, this rally is very small when viewed from the market's all time high. I expect the March 2009 lows to hold, but I also expect some consolidation and correction to occur once the market finishes probing the 9000 - 9,200 level. That correction should begin sometime after July 15 into the dog days of August.
Once this correction is over, I expect the market rally to enter a new phase and go even higher into year end. However, one of these days in the future - maybe in 2010- the market may top out from a much higher level. Like Jimmy Cagney exclaimed in "White Heat" just as everything was about to explode: "Made it ma - top of the world!" the market may eventually blow up over the governments wildly inflationary policies.
0 comments:
Post a Comment