I mentioned in yesterday’s commentary, “There is still a lot of fear in the market. But as long as it can hold 23,800 it’s up, up and away!” So here we are. The Dow pushed higher and appears like it is making a sprint to the next consolidation target of 26,200 as marked in the 39 minute chart (shows more perspective)
DJIA – 39 Minutes
Again, the wide consolidation implies a move up to 29,000 – but that would be in a normal market. This is anything but normal. But now that we’ve seen a solid break of 24,800 – the market should follow through (repeated from yesterday). The broad consolidation in the Daily chart implies a move to 29,500. That doesn’t seem possible given the environment, but it is what the chart predicts.
DJIA – Daily
Even with the economic debacle that has unfolded, the market CAN rally higher with a little help from the Fed. We have to go with it, unless the market drops back in the channel. Clearly, 24,800 is the new Support. Above that level, continued accumulation is in order on those stocks that have lagged the general market. We just need to watch for severe weakness. But, the few big stocks in the Dow can certainly push it down, while many are rallying. Again, it all has to do with how the market perceives risk in the short to medium term.
I still believe this market is going to come to terms with reality at some point. In the interim, there can be huge profits trading in the direction of strength. Whether that strength is due to actual bullishness or because the Fed is buying the market, we can’t know. If it IS the Fed, there is a point where stimulus runs out.