What's Next For The Market?

Technically, the market is at an inflection point. According to the Dow Theorists, if the Dow breaks 11,823.7 if would signal a correction and even put the market into another bear market. While technical analysis can be correct sometimes, it can also be incorrect sometimes. If it always worked, you could buy the right algorithm, kick back and relax. But, on the other hand, many traders follow the Dow Theory and that alone could move the market for a while.

We do know that the markets are levitated due to government spending and require additional government spending to keep going. So far, talking about cutting government spending is just talk; nothing significant has actually happened. I suspect cuts, if any, will be minor (less than the $1.5 trillion needed to get us a balanced budget.) Therefore, for the moment, I assume overspending and quantitative easing will continue, maybe for years.

also, Fed Chairman Bernanke has the stock market targeted as one of him main objectives. He wants the market to go higher so “animal spirits or greed” will kick in and take over so “real” consumer spending can take place. Therefore, If the market should sell off to 10,000 +/- (about a 15% drop), I think the government will intervene with both stimulus and more quantitative easing (printing money.) After all, it’s only 19 months to the next election…and voter pain will not be tolerated.