Stocks Stealth Bull Market Trend Forecast For 2010
So what does my interpretation of the dark pools or market psychology telling me today ? It is telling me for the stock market as a whole that the dark pools are still engaged in accumulating into a stock market multi-year mega-trend which at present is in the motion of shaking out the temporary weak longs along. Which means we are STILL in a stealth bull market where the vocal media-sphere view it as a BEAR MARKET RALLY that has ENDED, consistently WRONG market calls by popular perma-bears are a god send for the market manipulating dark pools of capital as they continue to accumulate and profit from the stealth mega-trend.
Stock Market Crash Again? Forget swine flu, the pandemic that has been doing the rounds for the past 6months is that of another Crash with the 1930's chart dusted down and presented as near fact of what is to transpire on every correction. However the markets response has so far always been to eventually push to a new high for the move. What happens to the crash calls ? They get amended and rolled out again on the NEXT correction! Don't believe me go check out what I wrote on 2nd November. However the damage has been done as short stops are hit and losses accrued that no broker will refund for the next crash call. Stock Market Crash Calls 1. You CANNOT know with any reliability that the stock market is going to crash until AFTER it has actually peaked and entered a downtrend. Anyone that tells you a bull market pushing to new highs is going to crash is going to lose you all your money, as the market rallying significantly from the crash call NEGATES THAT CALL where trading is concerned, because any short positions enacted upon the call are stopped out! 2. You can only enter a Crash TRADE barely a day or hours before the crash event. Crash calls made weeks, months or years in advance are WORTHLESS where trading is concerned, and where investing is concerned, all investors should have stops on their positions based on technical considerations of where they would admit their analysis is wrong on a particular stock. Crash calls are dangerous in that bring emotions into play which instead of staying focused on reacting to price action, adrenaline gets traders to commit to positions that will soon most probably bust their accounts where EVEN if the market eventually does CRASH, they will have been wiped out by the intervening rally SINCE the crash call! It is this fact that that is always forgotten. Don't believe me ? Go check ALL of the hyped stock and other market crash calls that in actual fact WERE FOLLOWED by moves that would have wiped out REAL trades had those calls been acted up on.
Economic Depression, What Depression ? - US GDP soared in the fourth quarter at an annualised 5.7%, yes, the rate of accent is probably NOT sustainable, but the debt fuelled bounce will continue a while before it peter's out into. The key point is as I pointed out in the analysis of October 2008. That we are NOT heading for another 1930's GREAT DEPRESSION, and therefore readers should scrub the notion of following the 1930's chart pattern towards anything like a 90% stocks crash. So far the analysis is proving correct.
Corporate Earnings - Corporate earnings have FOLLOWED the stock market higher, despite continuous doom orientated commentary of the past 10 months that has repeatedly stated that corporate earnings forecasts implied stocks could NOT rally.
ELLIOTT WAVE THEORY - The elliott wave pattern resolves to an easily recognisable wave 4 correction which implies a further 5th impulse wave higher will follow that could take the Dow significantly higher. Clearly the alternative more bearish count is that Wave 3 was a Wave C of an ABC move which would imply that the rally to date corrected the preceding bear market from the 2007 high. My interpretation is that we get something in the middle, i.e. that BOTH interpretations are now FAR TOO EASILY discernable from the price charts which suggests to me we get a volatile 5th wave higher, rather than a strong wave similar to Wave 1 and Wave 3. On a shorter term basis the immediate trend should resemble an ABC correction of which we are presently in the wave A decline that should shortly resolve towards a B wave rally before a C wave decline to end the correction.
TREND ANALYSIS - The Dow is falling towards major support at 10k. Given the strength of the downtrend to date, the probability favours a break of 10k that would target approx 9,600. The bull market trendline has been breached which suggests that the stock market has entered a new character of behaviour that will be significantly different to that which followed the March 2009 low. I.e. greater volatility, which suggests it will take the market some time to break the 10,729 high, which will probably now not occur until the second half of 2010.
SUPPORT / RESISTANCE - There is a series of strong support in the region of 10,000 to 9,800. and then 9,500. Should 9,500 break then the Dow could tumble all the way to 50% of the rally at 8,600. Overhead resistance lies at 10,300, then 10,400. With strong resistance in the region of the 10,600 to the high of 10,726. It will probably take some time for this resistance to be overcome. Next resistance above is at 11,250 that may mark a pause in the uptrend if it breaks higher enroute towards the target for 2010.
PRICE TARGETS - Downside price targets resolve into the 9,500 to 9,800 zone, therefore this should contain the current correction, a failure here would negate this analysis and probably mark the end of the bull market which initially targets a decline to 8,600. Upside projections show difficulty in breaking above the 10,729 high, though once overcome the Dow would target a level north of 12k.
MACD - The MACD confirms both the significant correction currently underway and the expectation of difficulty for the Dow to overcome its recent high for some time i.e. until it has been able to work out the overbought state. This suggests that it may take the Dow several attempts to break above 10,729 during 2010, with the eventual break out higher probably not taking place until the third quarter of 2010.
VOLUME - Volume has been WEAK throughout the rally, which has been one of the main reasons why so much commentary has been bearish during the rally. However it is perfectly inline with that of a stealth bull market and also implies that this rally has NOT been bought into. So all of the talk of hyper bullishness investor sentiment is basically rubbish as there is no sign of such sentiment in the volume, which remains heavier on the declines than the rallies and thus suggestive of SELLING rather than buying into the rally.
SEASONAL TREND - There is a strong seasonal tendency for stocks to rally into Summer then correct in October followed by a sharp rally into December. This is contrary to my growing expectations of a tough first half of 2010. In fact we may see in large part the opposite trend during 2010.
PRESIDENT CYCLE YEAR 2- The impact of the 2nd year of the presidential cycle on the stock market is for a weak trend into September, and a rally in the fourth quarter into the end of the year for a small average gain for the year. This much more closely resembles my growing expectations for 2010 then the seasonal trend.
Stock Market Conclusion Whilst the bull market is undergoing a significant correction that targets 9,500 to 9,800, nothing in this analysis has changed my long-term conclusion as of March 2009 that we are in a strong multi-year stocks bull market. Therefore I will leave it to others to still debate on whether or not to invest or playing around with transposing of charts form the 1930's whilst one of the greatest bull markets in history continues to pass them by as the further the stock market deviates from its bull market peak the greater will be the buying opportunity presented. Where the forecast is concerned, Ironically I am finding the first half of 2010 much more difficult to conclude towards than the second half, as I do expect a strong rally in the second half of 2010 to a new high for the bull market with the Dow breaking above 12,000 during late 2010 and may hold onto the 12k level into year end. The first half of 2010 will probably resemble a wide sideways trend with an upward bias after the current low is in, the Dow will repeatedly attempt to break above 10,729, how many times ? well there lies the volatility question, however turning towards utilisation of elliott wave theory, I am going to conclude the analysis towards 2 failed attempts before the final break higher, but it could be 1 or 3.
Dow (DJIA) 2010 Stock Market Trend Forecast Conclusion Dow 10,067 - Stocks Multi-year Bull Market that bottomed in March 2009 will trend Sideways during first half of 2010 attempting to break higher. The second half will see a strong rally to above 12,000 targeting 12,500 during late 2010.
Risks to the Forecast Technically we have had a major sell signal on break of the main uptrend line which means the current correction has YET to bottom, my target is eventually a bottom at 9,500 to 9,800 after a corrective B wave rally towards 10,300, the C wave decline should hold at this, however if 9,500 goes then this at least implies a bear market that initially targets 8,600.
The primary risk for the end to the bull market is that the central banks pull the plug on easy money as a consequence of a series of sovereign debt crisis. I.e. forced to push interest rates much higher than forecast to prevent a bond market / monetary collapse. In reality the governments have a window of opportunity to benefit form the strong economic recovery currently underway to CUT the budget deficits and get a grip on debt to GDP ratios. If they waste this opportunity then this forecast could fail as it resolves towards a bear market trend back towards the March 2009 lows.
However I put this risk at this point in time at about 25%, small but significant. It really depends on the economic bounce being as strong as I forecast it to be which will carry the markets AHEAD of it, and inflation and consumer confidence along with it therefore allowing deficits to be cut along side economic growth
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