Dow 12,000 A Possibility Or Not

By: Sol Palha | Tue, Mar 15, 2005
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"If you only look at what is, you might never attain what could be." -- Source Unknown

I have simply extended the long-term old trend line out. Yes we have a downtrend line and the new up trend line but you can draw them both in. The point here is that when the down trend line is broken the markets tend to rally right up to the old long term up trend line (which acts as a layer of resistance till its broken). Based on the above charts it looks like the resistance only begins somewhere in the 12,200-12,500 ranges. Does it mean that these targets will be hit? There is always a possibility that they could still be hit, however we are no longer strongly bullish as we were last year and are now moving into the cautiously bullish camp.

The 1st and 2nd targets we posted way back in Nov 2003 have been hit and if we hit the 3rd target then lady luck is certainly smiling on us.

If we can hold in the 8,800 to 9,000 ranges, then the outcome looks rather interesting. Esoteric cycle analysis (our proprietary indicator at the Tactical Investor) is basically suggesting the following targets if we can hold the above ranges:

1st target will be a break of the Dow over the 10,000 ranges
2nd target 10,500
3rd target 11,400
Extreme target 11,7000
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Now that the Dow Jones industrials, transports and utilities all put in new highs, the Dow theorists will start getting bullish; this means that there is a good chance the markets will experience a severe pull back. In addition the main objectives of this fast up move have been achieved:

1) Slaughter all the eager bears that had placed stops in the 10850-10900 ranges.

2) Trick the eager beaver early bulls into thinking that the gravy train has left the station without them on board.

Now that the train is packed with wounded bears and eager excited bulls the slaughter can begin. The smart money will most likely start to take the markets lower over the next few weeks and clean up the markets by eliminating both these groups. From Market update March 8, 2005

One other very important factor that almost everyone will miss if the Dow gets to the 12,000-12,500 ranges is that the dollar has lost over 30% of its value; the Dow will have to close 30% higher than its all time high of 11720 to usher in a true new bull market. This means the Dow would need to close past 15236. Over the past two years we have exposed this illusory bull via several articles in which we priced the Dow in stronger currencies such as the Aussie dollar, South African Rand, New Zealand dollar etc; priced in stronger currencies the Dow always looked rather weak and feeble. However one can still make a lot of money playing such markets if one invests in the right sectors.

The Illusory Bull

The BS bull~ Stay clear or ride?

The Dow has actually gone nowhere this year

"There are many who are living far below their possibilities because they are continually handing over their individualities to others. Do you want to be a power in the world? Then be yourself. Be true to the highest within your soul and then allow yourself to be governed by no customs or conventionalities or arbitrary man-made rules that are not founded on principle." -- Ralph Waldo Trine, American Author


Dow 12000 or Not?
By John Tyler

"My inclination to go by Air Express is confirmed by the crash they had yesterday, which will make them careful in the future." -- A.E. Housman,1920

If only the Dow approached the safety, and dare I say the predictability, of air travel. It's still far safer to travel by air than by car, but travelling by "Dow Air" would be an exception and you'd be well advised to carry a parachute and know how to use it.

The Dow Transports led the Dow at take off, but have now stalled with a spluttering engine.

Our indicators show 2 negative divergences, and while not a sell signal; show that the internal dynamics of the index is weakening.

1. Quantal Volume that calculates accumulation and distribution, is showing less accumulation than at the Dec. high

2. Entropy is below the Dec. high.This shows that although the market is now higher, it is "cooler." Too cool and the engine stalls.

How about the "Big Fella" itself, the Dow Jones Industrials? Although now not as important as in the past, we still like to track its every move.

Wouldn't the 12000 level be a lovely place for a double top?

Predicting these things is fraught with the danger of believing our own spiel and failing to read new signs as they emerge.We have found ourselves moving from a bullish stance in 2003 - 2004 ( when it was highly unfashionable!) to now leaning on the bearish side in Feb. 2005 when the market is not delivering the breadth and Volume that is needed to propel it much higher.

We are suggesting to our clients to take extreme care. Many of our ETF recommendations have now been stopped out for good profits, and we have trailing stops on SPY, QQQQ and Bull Funds - all of which have healthy profits as we got in when it was unpopular to be bullish.

Our parachutes are on and we are moving to the exit doors before the smoke, flames and bedlam.

Thanks for reading,

John Tyler, CEO


Sol Palha

Author: Sol Palha

Sol Palha

Sol Palha is a market analyst and educator who uses Mass Psychology, Technical Analysis and Esoteric Cycles to keep you on the right side of the market. He and his partners are on the web at

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