Dow at 9000

Dow at 9000 before the end of H1 2010 might look like a tough target, mainly because of the time forecast involved. Why before Jun 2010? The other question is where will Dow go before it turns down? Is Dow 11,000 achievable or are we talking about a few 100 points more till 10,700 and then the anticipated reversal?
11,000 we don’t know now, but Dow 10,700, Yes, looks likely. The ongoing corrective formation (slide 4) suggest that a final leg up we mentioned last time has more to go. About the reversal, why should it happen? First and foremost, a year long rally without a multi month pause, slow down or dip is a weak technical structure. Because when an asset prices rockets up or down, the trend does not get a chance to engage larger participation, owing to which the trend has lest sustaining power. This is why sharp rockets react violently. Second; Dow does not work in an isolated world. It is an intermarket asset. Last few weeks has seen inflexions across currencies around the world, even the Dollar witnessed a bout of strengthening. These inflexions have come after 12-15 months of trend and suggest that multi month reversals are in. Now, it is just a matter of time, a few weeks at best that the Dow should follow.
We invert prices to understand market structure and patterns. This issue we have inverted the Dow (slide 1).  After inversion Dow looked a lot like many currency pairs (slide 2). It looked like a lagging asset ready to follow the rest and reverse. Regionally, Nikkei pushed up as anticipated. Brazilian BVSP extreme momentum made first reversal signs. This comes at a time when we hear more positive stories on Brazil. IRTS Moscow tests 200 DMA, a big resistance. SSEC China has an ongoing corrective and potentially some upside left. Sensex India lacks a clear impulsive structure and is in an ending 3-3-3-3-3 formation. Hang Seng also seems in the final minor leg up.
Bill Meridian, market guru, top market timer runs Cycles Research. In his latest market letter he gives reasons for a market top in Q1 2010.  “First; 2010 is a year ending in zero. Edgar Laurence Smith’s study of decennial pattern has witnessed 65% of all years ending in zero have been down years in stock markets. The last one was 2000. Second; the 24-40 month cycle tops in February. Third: The month of March has been a turning point in each month except since 2000.”  You can visit him at www.cyclesresearch.com
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