Stocks Bull Market Grinds Bears into Dust, Is Santa Rally Sustainable?

By: Nadeem_Walayat

The stock market continues its relentless drive higher as the Dow set a series of new highs virtually every other day, ending the week at 17,634, now up more than 11% from the market low of barely four weeks ago as another supposed new stocks bear market has effectively been ground into dust as illustrated by the following chart.

My last in-depth analysis back in the midst of Octobers doom and gloom when stocks were lurching to the downside each day concluded in the following trend expectation, that made it clear that I expected the stock market to once more resolve towards its all time high before year end.

12 Oct 2014 - Is the Stocks Bull Market Over? Dow Trend Forecast into End January 2015

Stock Market Forecast Conclusion

My final conclusion is for the Dow to continue its volatile trend lower into Mid November towards 15,350 , probably bottoming out around 15,500. To be followed by a rally to 17,100 by the end of this year, following which I expect a weak January with Dow probably ending the month below 16,500 having traded down to 16,350.

Will the Stock Market Rally Continue?

Once more devastated bears can be found proclaiming that every down day as marking the end of the stock market rally as they have thrown out both money management and sanity many years ago as they remain fixated on delusional fairy tails such as the supposed megaphone pattern that always signals that an top is imminent but instead just keeps expanding year after year after year.

Clearly what is foremost in most minds is whether the current stock market rally can continue. In terms of probability I can only tell you that THIS IS the time for the stock market to be rallying. Therefore despite the stock market being clearly overbought on many technical measures such as MACD. However, both in terms of sentiment and probability this rally CAN continue INTO the end of the year.

Off course there will be minor corrections, for they are necessary to give the bears hope to sell into so as to set up the market for the next short squeeze spike to the next all time high as many gawking in puzzlement sat on the sidelines investors continue to throw in the towel and hit the buy button in disgust that they did not buy when stocks were far cheaper.

Technically, I would expect a correction to return to the breakout point before continuing higher, so to somewhat unwind the current overbought state could see the Dow revisit to approx between 17,300 and 17,200 before resuming its relentless climb higher into year end. In terms of of when, probability favours sooner rather than later, so a correction is likely imminent.

How high could stocks go by year end ? Well given the trend trajectory and allowing for 'corrections', the Dow could easily be trading north of 18,000 before the end of this year!

I'll come back to a more in-depth analysis of the stock market before year end so ensure you are subscribed to my ALWAYS FREE Newsletter to get this and other on going in-depth analysis and detailed trend forecasts in your email in-box. My next analysis 'should' be on Gold but presently I am finding it difficult to arrive at a conclusion with a probability of more than about 55%, which is too close to a coin toss to publish.

The bottom line is to try and forget the BlogosFear noise, I know it is hard because FEAR sells and what apparently sells the most is FOOLS FEAR, because their demented ramblings can appear so convincing! So try to condition oneself to perceive FOOLS FEAR as background noise i.e. a form of tinnitus humming in the background, recognise it for what it is just NOISE, instead look at the TREND and you should soon realise that the trend is RELENTLESS.

Reminder - " The Greater the deviation from the stock market high then the Greater the Buying Opportunity Presented".

Also see my last stocks article for a summary of the The Real Secrets of Successful Trading

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Nadeem Walayat

http://www.marketoracle.co.uk

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Nadeem Walayat has over 25 years experience of trading derivatives, portfolio management and analysing the financial markets, including one of few who both anticipated and Beat the 1987 Crash. Nadeem's forward looking analysis focuses on UK inflation, economy, interest rates and housing market. He is the author of five ebook's in the The Inflation Mega-Trend and Stocks Stealth Bull Market series.that can be downloaded for Free.

Nadeem is the Editor of The Market Oracle, a FREE Daily Financial Markets Analysis & Forecasting online publication that presents in-depth analysis from over 600 experienced analysts on a range of views of the probable direction of the financial markets, thus enabling our readers to arrive at an informed opinion on future market direction. http://www.marketoracle.co.uk

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