Dow 14,000 By The End Of The Year?
Dow 14,000 By Year End?
On New Years Day, I had dinner with at my
mother-in-law’s house.
Mother-in-Law: I read where the Dow would be at
“14,000 by year end.”
Me: (with my head hurting from too much New Year’s
Eve celebrating). Groan…(under my breath).
Mother-in-law: What do you think?
Me: Well, long-term predictions of stocks are
difficult. This is why I stick to shorter time frames.
Mother-in-law:
But the article said that the economy
will improve and earnings will be up.
Me:
Yes, the economy has been improving for some
time and those arguments make sense. However, as I said, long-term predictions
are tough. And, lately, the market has lost momentum.
Mother-in-law, YOU’RE ALWAYS A BEAR!
I left before dessert.
I’m not always a bear. It’s just that long-term predictions
don’t work. There’s just too much that can happen in the meantime. I prefer to
stick with the short-term and hopefully, through the use trailing stops, catch
the occasional longer-term move. True, one of these gurus will be right. The
problem is figuring out which one (I’m sure they’ll have him/her on TV at the
end of ’05).
On Monday, the Nasdaq opened nicely higher and initially traded to multi-year
highs. However, it soon found its high and began to sell off hard. It stabilized
in early trading and then drifted higher/sideways. However, the selling resumed
late in the day.
The S&P put in a similar performance.
In the sectors, as mentioned recently, like the market itself, many remain
in a longer-term uptrends but have lost momentum as of late. Examples of this
include (but not limited to) software, telecom, and Internet. The semis remain
near the bottom of their wide-and-loose trading range. Biotech broke out
recently but have already given back all of those gains. Outside of tech, the banks remain below multiple
tops and/or have lost momentum. Broker/dealer has been trading sideways for
quite some time. Retail, in spite of recent attempted breakout, still remains stuck in a sideways trading
range. Energy was decimated on Monday. This action suggests that it has topped
and is making another leg lower. Ditto for Gold.
So what do we do?
Lately, I have been
concerned about the lack of momentum in the indices. This action has created a
bearish wedge (see charts above). This, combined with the aforementioned poor
sector action, suggests that we should remain in “wait and see” mode.
On the short side, if we continue to see follow through from Monday’s massacre,
we could see additional transitional (i.e. early trend) setups soon
No setups tonight. If you are interested in a learning
example (on a transitional short setup), I have an audio/visual of
recently mentioned Audible
(
ADBL |
Quote |
Chart |
News |
PowerRating). Check the archives on TradingMarkets or
email me if you need the link.
Best of luck with your trading on Tuesday!
Dave Landry
P.S. Reminder: Protective stops on every trade!
P.P.S.
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