The Dow Heads Into FOMC Week Again.

The Dow was up again last week for a full week gain of 143.68 points or 1.10%. On the weekly scale, I see that the advance is already slowing down even though volume remains relatively stable. Over the last 3 weeks, the Dow has gained 349.85 points, 158.96 points and finally 143.68 points last week in a decelerating growth. This is totally natural in the overall scheme of things and is the way all markets behave. All markets move forward in a series of contracting and expanding movements, like ocean waves.
Many people ask me if the bull will run on forever? That the market look so bullish now that it looks invincible. Well, common sense mathematics told us that, sadly, no. The market will NOT go up and up... why? Well, if the market move forward like it did over the last 2 weeks at an average gain of 150 points a week, would we see the Dow gain 7,800 points after a year? The Dow has existed since 1916 and has gained an average of only 145 points A YEAR! So, how long do you think the Dow can sustain 150 points gains without some really cruel pullback? ;-)

So, the reality is, the Dow will pullback and the longer it takes to happen, the more severe the pullback will be. Period. All traders need to have a means of detecting such a pullback early in its development so that sensible hedging can be performed.

I continue to be bullish, as you can see from my sentiment picture on the right, but I am putting on hand on the rein right now just in case.


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