Sunday, 19 January 2014

Dow 30 - Dont believe the hype.

When the daily tabloids and CNBC start talking about the bubble in the stock market  and the correction that is coming, you can be pretty certain they're not going down yet....  recall the Gold hype and the bubble that didnt pop after the September 2012 highs.....we went sideways with Main street encouraged to buy anything under 1700.... with 2500 the target.....then ... down she came .. I think that a similar fate will occur in the stocks albeit a more violent correction.

From a macro perspective the reduction in QE by the Fed historically has provoked a sell off in the stock markets and this will occur again no doubt, but near term there is an interesting pattern unfolding in the Dow 30 that would encourage another leg to new all time highs.

Currently, my daily signal remains long from 16167 basis the cash market from the 18th December. The 61.8 Fib expansion has been achieved at 16488 with the initial profit target set at the 100 Fib expansion at 16677.



Looking at the 4hrly chart below, an inverse Head and Shoulder pattern has formed with the neckline at 16491. Should the pattern play out, the target sits at 16770 which is also the 1.618 Fib extension of the recent minor correction from 16531 to 16239.



No comments: