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Dow Jones Stock Market Index Reverses at 12,000 Target, Correction Starts

News_Letter / Stock Markets 2011 Feb 08, 2011 - 08:50 AM GMT

By: NewsLetter

News_Letter The Market Oracle Newsletter
Jan 31st, 2011 Issue #3 Vol. 5


The Market Oracle Newsletter
Jan 31st, 2011            Issue #3 Vol. 5

Commodities Currencies Economics Housing Market Interest Rates Education Personal Finance Stocks / Financials Real Gems

Dow Jones Stock Market Index Reverses at 12,000 Target, Correction Starts

Inflation Mega-Trend Ebook Direct Download Link (PDF 3.2m/b)

Dear Reader

The Dow achieved the long standing limit target of 12,000 early week and afforded traders / investors plenty of opportunity to bank profits on the rally to Dow 12k that began late November that can only be described as market trending higher on autopilot with very little reaction against it.

The Dow held up at around the 12k level for 4 straight days to break lower on Friday's open that the rear view mirror looking mainstream press blamed on the Egypt situation. There always is a triggering news event in hindsight, anything will do, if it was not Egypt it would have been something else!

My last in depth analysis and concluding forecast for the Dow projected a trend higher into Mid January 2011 to target Dow 12k as illustrated by the below original graph (18 Oct 2010 - Stocks Stealth Bull Market Dow Trend Forecast into Jan 2011).

Last weeks quick interim analysis (24 Jan 2011 - Dow Stock Market Index Interim Trend Analysis and Forecast Update ) concluded in :

The above analysis is concluding towards probability favouring continuation of the trend higher to the Dow 12k target by early Feb, when the market can be expected to consolidate the advance of the past 6 months and enter into a significant correction that at this point suggests a 10% decline, so tighten the stops and take the ongoing rally to bank profits which is the number one AIM of trading / investing!

A painful lesson that analysts need to learn is that too much analysis is just as bad as NO analysis, because the more analysis one does following the now distant original analysis that brought the trader into a position the greater the likelihood exists of doubt and confusion creeping into the traders thought processes, especially if analysis is done virtually every day, a recipe for disaster!

In my opinion and experience, the only way to trade and invest is to arrive at a firm conclusion on a trade / investment scenario, then let money management rules manage the position with limit and stop orders to ensure you stick with the programme and exit either AT target regardless of what the market does AFTER you have exited because that is irrelevant to you, as the only thing that matters is the price you enter and the price you exit, if your scenario starts to go wrong, then the market will throw you out of your position, and THEN you can contemplate new analysis and scenario building AFTER you have EXITED open positions.

In fact as long as a trader does NOT constantly reanalyze the market than the distance in time form the original analysis should act to reinforce the stops and limits and money management as one forgets the intricacies of original analysis over time, which is how it should be so as to ensure that once one has existed one is able to perform analyse for the next trade setup without any bias.

Instead much analysis and commentary out there is written with the benefit of hindsight, with statements such as market moves have been missed or psychological blocks that turn the perception of market trends into the opposite direction such as stating a bull market is a bear market rally which is because the perma-bear analyst is constantly reinforcing WRONG analysis of now approaching 2 years! Which if they actually forgot what they wrote before they may be able to arrive at a more probable conclusion in the present rather than being stuck in a bear market mantra time warp!

The fact is NO broker ! NONE, will every let you trade in HINDSIGHT ! Again what the market does AFTER you EXIT is IRRELEVANT!

More on the Real Secrets of Successful Trading in my forthcoming ebook anticipated completion during late March 2011 (FREE DOWNLOAD).

My next Dow stock index analysis will follow in Mid Feb, following next analysis on UK Interest rates ahead of the next Bank of England MPC Meeting (10th Feb) and quarterly Inflation Propaganda report (16th Feb).

Commodities React to Threat of Freedom in Egypt, Middle East

Freedom is Sweeping the Middle East as western backed dictatorships look set to topple over as their populations awake from over 30 years of totalitarian rule. The spark for the whole trend was the global food crisis as populations on earnings of 1/10th of those in the west are highly sensitive to even small price changes.

Egypt, the middle east's most populous nation looks set to be next after Tunisia, so far the price paid by the population in terms of deaths at under 100 looks relatively low, especially when one compares against that which has occurred in the recent past such as the 50,000+ that died in Algeria. The USA and UK as ever are walking a fine line by sending arms to the dictators to suppress their populations such as news images of columns of U.S. Abraham tanks lined up in central Cairo, to sending public broadcast messages of neutrality and Freedom that do not match what they say behind the scenes as the wikileaks embassy cables reveal.

The quest for freedom in Egypt is only just beginning as there is no sign as of writing of the Dictator Mubarak going easily as did Tunisia's dictator, so the scene is set for things get far bloodier for the Egyptians quest for freedom.

Gold and especially Crude oil leapt higher on Friday because if Egypt goes FREE, ultimately so will the Gangster dictatorships of Arabian Peninsula that account for most of the worlds crude oil exports, though it is going to be tough for those populations to pries the hands of the gangsters from the wealth of those countries.

As for the trend, whilst Gold's Friday rally cheered the gold bugs to declare that the correction was over and resumption of the bull market was at hand, my instant take is that the trend is STILL DOWN for Gold, the one day rally failed to reverse the downtrend that suggests probability ultimately favours a continuation of the trend lower to new lows for the move. I have been flat for approaching 2 months now on long standing targets being achieved, Gold $1400 and Silver at $29. I will do an in depth analysis over the coming weeks to attempt to map out a trend scenario for 2011, though probably Crude before Gold as that is an infinitely more important commodity.

Your always leaving his tax return filing to the last minute analyst.

Source and Comments: http://www.marketoracle.co.uk/Article25961.html

By Nadeem Walayat

http://www.marketoracle.co.uk

Copyright © 2005-11 Marketoracle.co.uk (Market Oracle Ltd). All rights reserved.

Nadeem Walayat has over 24 years experience of trading derivatives, portfolio management and analysing the financial markets, including one of few who both anticipated and Beat the 1987 Crash. Nadeem's forward looking analysis specialises on UK inflation, economy, interest rates and the housing market and he is the author of the NEW Inflation Mega-Trend ebook that can be downloaded for Free. Nadeem is the Editor of The Market Oracle, a FREE Daily Financial Markets Analysis & Forecasting online publication. We present in-depth analysis from over 600 experienced analysts on a range of views of the probable direction of the financial markets. Thus enabling our readers to arrive at an informed opinion on future market direction. http://www.marketoracle.co.uk

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any trading losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors before engaging in any trading activities.

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