Dow Jones Forecast: Overstretched, Pullback Likely

• In my daily analysis of the Dow Jones 30, the first thing I see is that the market does in fact look up little bit stagnant at this point.
• Because of this, I think you’ve got a situation where traders will continue to look at this through the prism of a market that is a little overdone.
• I do believe that sooner or later, we will have to make a bigger decision, but in the short term, I recognize that it’s very likely that we will see either a pullback, or some sideways trading.

Overstretched

We are clearly overstretched at this point as the market has got far too ahead of itself as of late. Traders are reading far too much into the idea of an interest rate cut, and it’s also possible that the market will continue to behave in this erratic behavior. After all, we have seen wild swings, which of course does not invoke a lot of confidence, and typically speaking, volatility begets more volatility. In this environment, the likelihood of a pullback does make quite a bit of sense, and we could drop all the way down to the 50-Day EMA which is currently near the 40,000 level, and not even bat an eye.

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In general, I think you need to be very cautious with your position sizing, but I also recognize that from the long-term perspective, the Dow Jones 30 is still very bullish, and it should be thought of as such. While we could break out to the upside in clear the 41,500 ceiling above, I think it would take quite a bit of effort and momentum to make that happen. On that breakout, the so-called “measured move” could be for 2000 points, but we have a lot of work to do between now and then to make all of that a reality.

A little bit of patience probably goes a long way in this market, so therefore I think a pullback is probably what you’re hoping for, and then you can take advantage of a bounce as it turned back around and continues the overall uptrend. As things stand right now, I have no interest in shorting the market

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