The General Market had a strange week - it started out week, then recovered mid week, and finally pulled back at the end of the week. The DOW still finished the week slightly positive, however the Nasdaq and the S&P 500 pulled back for an overall loss for the week.
The Market looks prime for a continued pullback here. Personally, I think the market pullback could continue until Thanksgiving, then find support and possibly start a nice end of the year rally after Thanksgiving. The market is generally strong late in the year and the Tax implication might keep the market afloat until mid January. Consider the fact that since the market is up so much this year, many investors are riding on huge profits. Thus, many of these investors may not want to sell until next year due to tax reasons.
One the message board last week, I posted an article about Michael Belkin. Belkin is a highly respected newsletter writer and market researcher who writes a weekly newsletter. His newsletter costs $36,000 a year, therefore I'm not a subscriber and I doubt any of you are. However, many Wallsteet analysts and Fund managers are.
Belkin has gained notoriety over the last few years with accurately calling every market bottom and top of the last few years.
Here's some paragraphs from the Steet.com article:
"Belkin defines major bubbles as excessive deviations from stocks' 200-week trend, while major crashes entail reversion to their 200-month trend. That's not information you can use to daytrade, but it helps with the big picture. And the big picture, in his view, amounts to this:
In March 2000, his prediction for a 65% decline for the Nasdaq was predicated on a belief that it would sink to its 200-month (or 16.5-year) average.
In October 2002, the Nasdaq rebounded off that level, which was around 1180.
In November 2002, his belief in a Nasdaq rally to 2280 was predicated on a belief that it would rise to its 200-week moving average at that level amid a business-cycle bounce.
Now he thinks the index will fall short of his predicted move because private-sector credit growth is declining sharply despite the Federal Reserve's neutral-to-slightly-stimulative stance
What's with the number 200? Nothing magical, he says, except that it has worked to define levels of support and resistance in every major bubble and crash he has studied over the last 100 years. A bear market bounce in a stock index or commodity from its 200-month average to its 200-week average, he says, is relentless, takes about a year and ends with low volatility -- all characteristic of the recent U.S. rally.
Belkin abandoned his Nasdaq 2280 target because he noticed that money-supply growth had begun to contract as credit markets froze up -- an event that, in his words, has "drained the economy of bubble fuel."
Belkin was indeed correct, the Nasdaq fell to its 200 month MA and then bounced perfectly off of it.
see my chart on the Nasdaq that graphically illustrates his points:
However, at this time, I don't agree that the market will just fall and make new lows. As I stated above, I think the market will have a correction that will probably last until Thanksgiving, then I think the market could have a nice end of year rally.
I think Belkin should have stuck with his first guess, and I think sometime next year, the Nasdaq may indeed rally to the 200 week MA, (as Belkin first stated), and that may be the final top. Who knows, we shall see, I could change my mind in a heart beat depending on what the charts do in the next coming weeks.
Also, notice that Belkin is advising shorts on the Housing Stocks, just as I noted last week with rising interest rates. Also, notice how he mentions emerging markets such as Chile and China, you will find charts of these foreign countries in my Foreign Investment section.
Article About Michael Belkin