DOW Poised to Move Even Higher

We have now entered the "fall" season which has typically been a difficult time for stocks. Almost everyone has been waiting for "the pullback" because the market has "overextended itself." Why do the experts believe this market is overextended? We have just passed through a highly disconnected time in the market where fundamentals disconnected with overall market performance. Some have argued this was part of the normal and predictable business cycle. (See our Marketdoc Report, "Can You Say Business Cycle" from March 14, 2009) Yes, the argument can be made that this cycle was more severe due to the real estate and financial crises. There is still alot of cash on the sidelines which has to be put to work. The pressure is building for more cash to enter this market.

When I look at the Dow technicals I see the index moving higher. Almost all of the technical indicators show there is still room to the upside rather than a "topping" formation that would typically be seen before an extended pullback. Our Marketdoc technical goal places the Dow somewhere between 10,000 and 10,500. If I had to be more specific I would say 10,200. Sure, I could be wrong. There are still some uncertainties out there, particularly the health care debate. Anything can happen overnight in the Middle East. But technically, I am calling it as I see it. The economy is definitely picking up. A trip to Michigan recently showed some businesses even have "Help Wanted" signs out. GM'supplier Delphi Automotive is exiting bankruptcy after four years. Other companies are reorganizing their debt to avoid bankruptcy. The recovery has been underway. The declining dollar is helping international corporate earnings (for now). Many stocks are still inexpensive. And real estate is making a comeback. The glass is more than "half full" at this point. Typical leaders in an early economic recovery are the financials, transports, and technology.

This viewpoint is definitely not main stream. Most of the experts like to look at lagging indicators, like unemployment, for an idea where we are going. Its like driving your car while looking through the rear view mirror. That's alright. Marketdoc is working on a 53% portfolio return so far this year. We took profits when our return approached 90% last month. Not bad.

Note: The above is for information purposes only. Any decision to buy, sell, or hold a specific investment for a portfolio should be discussed with your own personal investment advisor.