A Technical Forecast of Stock Prices

There has been a lot of gloom and doom written about the stock market and the economy in recent months. Opinions have been across the board about where stock prices will go from here Industry And Competitor Analysis Pdf – bullish, bearish, and neutral. But we can know what professional fund managers think based on how they vote with the money they control – and that shows up in the stock charts.

The strong bull market in stocks from March 2009 until April 2010 that saw a rise of over 60% in the Dow Jones Industrial Average has faltered since April. In that time, stocks have dropped around 10% from the highs and are flirting with a further drop. The next three months will give a critical signal as to what the combined opinion of market participants think the stock market is headed. Here’s why.

The stock market does not go straight up forever – up trends stop when buyers are unwilling to continue buying; then they wait to see if the economy will support a further increase in prices. If most buyers feel confident about their purchases, stocks Lean Manufacturing Synonym don’t drop much from their highs and they hold on to the stock they have purchased. If, however, more and more buyers become nervous that stock prices won’t continue to climb and the economic outlook is growing worse, stock prices will fall further.

The current situation shows that the markets have only dropped about 10% from their highs. This is a very modest pullback after a bull market that lasted over a year and climbed by more than 60%. If you go look at the pullback in the Spring of 2004 after the bull market of 2003, you can see that a 10% pullback from the high is modest and normal before the bull market resumes.

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Stocks also have a seasonal nature to them. September and October have consistently been two of the worst months on record for stocks: some of the biggest crashes in history have happened during these two months. How the market reacts during the next two or three months will be critical. If the Dow Jones Industrial Average doesn’t go much below 10,000 – that would be a very bullish sign. The fact that the DJIA has already held above 10,000 for the most part – and quickly rallied when it dropped briefly below it in June and July 2010 – is also bullish. If we don’t see anything worse in the next two or three months then we have already seen in the markets over the summer, then it will be time to load up on stocks again for the next leg up in the bull market.

Buying stocks below Dow 10,000 will prove an excellent spot for long-term investors to buy.

As always, I welcome your questions or feedback. You can email me at [email protected]

Many Profitable Returns,

Trader Gregg