Wednesday, April 14, 2010

Will The Bull Run Continue in Dow Jones?

The US Stock Index Dow Jones made an all time high of 14,279 on October 2007 and it was followed by a crash towards 6440 in march 2009. The crash to that level was followed by a rally towards 11000. Today it has made a high of 11038. Now the Million Dollar question is, will Dow move past 14000 in the near term.

Fundamentally speaking, though the financial situation is under control, it has not fully recovered from the recession. Though some indicators are improving, it really doesn’t reflect the growth we have seen 3 years back. The fundamentals have not improved as the stock prices. When everybody is bullish on Markets and Economy, a major top is likely to form. The same situation is prevailing now also. Every where we can see optimism. Nobody is talking of badtimes which has happened only one year back.

Technically speaking, the crash in 2008 is followed by rally in 2009 which is very quick when compared to the previous rallies. It means it is V shaped recovery. These type of vast price movements are always seen in Market bottoms and Market Tops. Since the present volatility is taking place in a Top area, the present technical situation is better construed as a top which indicates, the present rally is likely to lose steam in coming weeks. Going by the technicals, it indicates Dow is unlikely to cross 14000 for another 3 to 5 years.

Retail Investors should be carful at this time. They should stick to the law, ‘Buy low and Sell high’. Right now the we have to sell high. The impending top is around the corner. Be prepared for the event. Don’t get buoyed by the Euphoria in the Markets.

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