DJI Rest of the Year...(Down to 9800 but up to 12500)

DJI down to 9800 but 12500 by years End

I beleive we are going to see a lot more “bearish” reactions in the markets as a vote of no confidence to the Euro bailout the more we hear about it.

Who pays for these bailouts? The private sector and countries with more wealth. This will impact the Euro-Industries and add the depreciation of the Euro as a whole and this is not a good thing for Europe. Exports will slowly choke. The slow collapse will not keep the market bullish for much longer.

Okay so what is now in store for the DOW?

We believe the weakness we are now experiencing in the markets will lead to a move into a “trading zone” instead of a move downward yet. Sentiment is clearly bearish. If you are an Elliot Wave Theorist, you will 

be able to identify a completed 5th wave in the first half of May. As a wave 5…wave five is the final leg in the direction of the dominant trend. The news is almost universally positive and everyone is bullish. Unfortunately, this is when many average investors finally buy in, right before the top.Volume is lower in wave five than in wave three, and many momentum indicators start to show divergences (prices reach a new high, the indicator does not reach a new peak). At the end of a major bull market, bears may very well be ridiculed.

The bearish side of the WAVE has a pattern we call A-B-C and the “C” is the end of the downward movement. “C” is usually the lowest leg. If this is the case, we would need to see the market dip below the 9860 level. 

So how long should we expect it to last? Possibly into October. This means an extended period of weak stock prices in the market. If the market extends higher still, be prepared for high volatility and wild daily market swings. 9860 is a long way down as the DJI toys with testing new lows.

But don’t give up on the bulls yet!

Despite this observation, the market as a whole still has “bullish momentum” with it. You don’t slow down a train in 2 feet. For this reason, look for highly volatile corrections in the market as it eventually forms its A-B-C Elliot Wave Pattern. We could see huge swings from 9800-10900 over a period of time.

Projections are for the DJI to still hit 12000-12500 by years end after its correction. Just watch the correction.