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March 6, 2009

Dow Can Go to 4,000 points

The Dow Jones Industrial Average closed below 6,600 yesterday and lost over 280 points on the day.

Recently a lot of market bears bears have been calling a bottom in the market.

I think it is a bit premature to say the lows are in, that we have hit bottom. We can certainly bounce from any point here, I mean the market has been falling precipitously and can certainly bounce.

In bear markets you get vicious rallies, that is what keep the bear market going. Bear markets are based on hope. When you get these false rallies you get people confident to stay in the market.

If we look at the chart and ask "where will the market bottom, where will the Dow Jones Index bottom?". I think 4,000 is a realistic target. 4,000 points was the overhead resistance in the market back in 1994, 1995.

When the Dow broke above that 4,000 level was when we really started a huge bull market in the second half of the nineties. And it makes sense if we retrace that entire move.
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