Here are some updates on a series of long term charts I posted last year. Interestingly the case for Dow 32000 is still alive and kicking. Who would have thought?
Let’s start with the Dow going back to 1928. This is a very large image, so click on it to see the full detail:
The Dow has reached the long term overhead resistance line connecting it with the 2000 and 2007 peaks. It has also kept above the trend line that started from the 2009 lows. The market is increasingly squeezed between these two lines, not able to make up its mind where to go next. But we are going to find out soon.
Zooming in on the recent decades we can see the situation more clearly (click for larger image):
The Dow has been sputtering near the 16500 resistance level all year. But now it appears to be breaking out above 17000. And that was the final criterion for my Dow 32000 scenario, as I wrote last summer:
A few conditions will need to be met for this very bullish scenario to remain in play:
1) The current correction has to be shallow and cannot venture too far below 14000 before recovering.
2) The green overhead resistance line, connecting the 2000 and 2007 highs, will have to be overcome and left behind. That’s not going to be an easy feat. But with all the ongoing QE, who knows?
3) This breakout above 17000 would have to come by summer 2014.
So, what next? The breakout above 17000 could still prove to be a false breakout, and that’s what more than a few market observers are calling/hoping for. But I would not rule out the case that this market will simply continue to climb to 20000+ by early next year. Few people are betting on it, the market “needs” a correction, isn’t it? I would rate chances for a further climb at 30%.
Another possibility is a drop to ~15000 this autumn, which would break the up trend line since 2009 and clean out “weak hands”, only to rebound and climb to 20000+ in 2015-16. I would rate this a 50% chance.
Third possibility is a drop to ~15000 with no buyers showing up and then a further decline to 10000-12000 or lower. I would rate this a 20% chance at the moment.