Today's Market
by Dr Invest


There is a kind of uncomfortable feeling amongst most investors at this moment. What do you do when the market is showing every sign of advancing, but the fundamentals pointing to a decline. This is perplexing because you have to explain to your investors why you missed out on the market rally, but if you get into the market and the rally sputters and crashes into a heap, you have to explain why you lost your investor's money.

The report from the trenches is that we will continue into 2012 bordering on a recession. Bernanke reported to Congress that this downtrend would likely occur. Some analysts are now suggesting a 60% likelyhood that we will enter a recession in 2012.

Adding to the dim outlook is that the Eurotribe has been working at stimmulating the EURO across the 17 countries using the currency for the past two years. And now, with a new plan, they are going to resolve the EURO problem in three months? Probably not!

The dollar has been gaining value against other currencies. This is good for us because we have more purchase power with each dollar, but it is always true that when the value of the dollar rises stocks GO DOWN. Except, the market is suddenly in a rally. These two realities can't co-exist.

The price of COPPER is the banner that reflects the movement of the stock market. If copper is declining, the market is sure to follow. Well, COPPER is decling in value; yet, the market is in a sudden rally. These two realities can't co-exist.

Below is the S&P 500 in a recession as marked by the red line and the S&P 500 in an uptrend as marked by a green line averaged over the last ten years. The red line is very simmular to our present market. The DOW level of resistance is at 11,600 and the DOW presently is at 11,500. If the DOW can break-out of 11,600, we could see a continued rally through the end of 2011. Should the DOW hit the 11,600 barrier and collapse, we will likely continue the CONSOLIDATION PATTERN.





What can we expect from this market? Here is my guess. Just like the blue chart, with the red line showing the average monthly movement over a year for the S&P 500, I would project that we will see a series of higher highs for the next three months. What we call the CHRISTMAS EFFECT will take hold and raise the market somewhat. I would not see the DOW moving much higher than 12,000. The CHRISTMAS EFFECT will not likely continue much past December, so I would have an exit plan in place to minimize my losses.

If the DOW fails to break through the 11,600 target by mid November, you will need to be prepared to stay out of the market or if you are already in the market, you will need a carefully executed exit plan.

(Note: the above information is for entertainment purposes only and not to be used to make any finanical decisions.)