For stock market Investors and traders there were two key events during the year.
1. The Stocks Bear Market Bottom of early March 2009 (Dow 6470).
2. The birth of the Stocks Stealth Bull Market that saw many indices soar by more than 60% over the next 9 months.
The primary purpose of analysis is to generate market scenario's that have a high probability of success for the primary purpose of monetizing on these trends that are usually contrary to the consensus view.
In this regard the stock market bottom of early March fulfills this as the whole subsequent rally has been called by the vast majority of analysts across the board a bear market rally to SELL into, virtually every correction has been followed by calls that the market has topped and the resumption of bear market lows as imminent. The most notable crescendo of the crash is coming calls was during the October correction when widespread commentary spread forth of an imminent crash that AGAIN FAILED to materialise.
The purpose of this article in advance of ongoing work on the formation of a stock market scenario for 2010 is to recap on my key analysis and projections for the stocks stealth bull market during 2009.
Dow Jones Stock Market Forecast 2009 - 20th Jan 2009
Dow Jones Mid 2009 Low 6600 - 70% Confidence; End 2009 at 8,600 (During December 2009) - 65% Confidence
Stealth Bull Market Follows Stocks Bear Market Bottom at Dow 6,470 - 14th March 2009
Now watch ! How this STEALTH bull market will consistently be recognised as just a bear market rally to sell into and NOT to accumulate into. All the way from 6,600 to 7,600 to 8,600 and even beyond, the move will be missed by most as consistently bearish rhetoric and data will ensure only the smart money accumulates, for the small investor has now become Conditioned to the Bear Market Rallies of 20% and subsequently plunges to fresh lows. Many, many months from now, with stocks up 30%, investors will then WAIT for THE BIG CORRECTION, THE RE-TEST to buy into the apparent BULL Market , Well these investors will still be waiting as stocks pass the 50% advance mark, AGAIN only those that will have profited are the hedge funds and fund investors (Smart Money) WHO HAVE BEEN ACCUMULATING , as I elaborate upon next.
In Summary - We have in all probability seen THE stocks bear market bottom at 6470, which is evident in the fact that few are taking the current rally seriously instead viewing it as an opportunity to SELL INTO , Which is exactly what the market manipulators and smart money desires. They do not want the small investors carrying heavy losses of the past 18 months to accumulate here, No they want the not so smart money to SELL into the rally so that more can accumulated at near rock bottom prices! Therefore watch for much more continuous commentary of HOW this is BEAR MARKET RALLY THAT IS TO BE SOLD INTO as the Stealth Bull Market gathers steam.
Stealth Stocks Bull Market, Sell in May and Go Away? - 26th April 2009
Conclusion - Immediate term conflicting analysis, will there be a continuing rally into early May or not ? Clearly early week will be weak and a lot now depends on whether the support of 7,800 holds, the 280 point gap between the last close and support should give the market plenty of swine flu room to breath, it is a tough call but after that early week wobble, I would go with a continuation into early May to set up for the main move which is for the significant correction that targets a decline of about 14% or Dow 7,500 from 8750. If 7800 fails early week that implies Dow 7,100. So just as the herd is starting to pile in the smart money will be positioning for a significant correction and importantly the move will be TRADEABLE, none of these 1 or 2 day falls that have suckered the bears in during the rally, but for a sustained down trend though swine flu may bring this forward to the start of the week. Note this is an interim update, my in depth analysis will attempt to more accurately map out the Dow swings of several months so make sure your subscribed to my always FREE newsletter to get this on the day of publication.
CONCLUSION - My earlier fears about a bull trap appear to be unfounded, the stock chart is talking that we are in a stocks bull market, and is suggestive of a trend higher towards a 2009 target of between 9750 and 10,000, with a high probability that we may get there before the end of October!. Key danger areas for this scenario are a. for the trend line to contain corrections, and b. that 8080, MUST HOLD.
The target for the termination of the current phase of the bull market rally was between 9750 and 10,000. As mentioned above, I am not expecting an easy ride for the fifth wave as clearly it is an obvious pattern to interpret following waves 1,2,3,4. What does this mean ? Well wave 3 is screaming weakness, so that suggests a weak push higher rather than something that resembles wave 1.
Stocks Bull Market Forecast Update Into Year End - 2nd Nov 09
There is nothing to suggest at this point in time that the stocks bull market is over which means that that corrections are for accumulating into, the overall trend is for stocks is to continue climbing a wall of worry whilst investors are scared by the vocal crash is coming crowd that will continue to re-write history to always be right in hindsight to again come out with more crash calls over the next few months as the Dow chart of the 1930's gets it's start / end date manipulated again so as to fit fresh crash calls.
The stocks bull market that has raged since the March low has fulfilled the original objective for a 50% advance, therefore upside for the next two months looks limited with greater risk of downside in the coming weeks though pending a break of the major support trendline which implies a rally in the immediate future. All in all this is suggestive of a downtrend towards 9,400 into Mid November with a year end rally to back above 10,000 targeting a rally high in the region of 10,350 to 10,500 during December.
My concluding thought, we get the santa rally to a new 2009 high for the Dow into the last few days of December and then the market starts the significant correction, and I'll try and get my forecast for 2010 completed before it begins!
As for where I think the stock market is headed during 2010?
The analysis is underway and will culminate in final conclusions / forecast trends in the following sequence - Inflation, economy, interest rates, housing, stocks, other markets. To ensure you get analysis that money cannot buy, subscribe to my always FREE newsletter.
By Nadeem Walayat
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Nadeem Walayat has over 20 years experience of trading derivatives, portfolio management and analysing the financial markets, including one of few who both anticipated and Beat the 1987 Crash. Nadeem's forward looking analysis specialises on the housing market and interest rates. Nadeem is the Editor of The Market Oracle, a FREE Daily Financial Markets Analysis & Forecasting online publication. We present in-depth analysis from over 500 experienced analysts on a range of views of the probable direction of the financial markets. Thus enabling our readers to arrive at an informed opinion on future market direction. http://www.marketoracle.co.uk
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