Stock market prediction: The week ahead

This is my 800th post since Blogging in 2005. I have had 31,000 visitors who have read 50,000 pages. Today I will comment on the stock market and what is in store next week, as I see it. The Dow has not completed a perfect "W" pattern this week and neither has the Nasdaq. This means it is doubtful we have really bottomed out. But the good news is we should know whether it has bottomed by the end of next week. What does this mean for investors? It means you still must be cautious but you may want to start buying by nibbling at some very beaten up stocks that are good value at current prices. If we get the week showing a move up from here then we have retested the bottom and are either going to stay around the 8,600 to 9,000 level for a while or we are going to go back up to 10,000 and be testing resistance of that high till years end. I do not see us going over 10,000 and staying there by years end.

If you look at the shape of a "W", and think of it on a chart tracking the price of a stock, if the "w" pattern is perfectly horizontal as it is in this line of type, that means the price will stay above the lowest legs of the "W" pattern. If the "W" pattern is slanted down, where the right leg of the "W" is lower than the first leg, the stock is going to accelerate down in price and the opposite, if the "W" pattern right leg is higher than the left leg. If this is confusing to you, it would be worth getting a book on Technical Analysis of Stock charting. Several quality books are out there, one by the author Martin Ping titled, "Technical Analysis Explained". It will help you understand what is happening in the stock market and your own stocks. Many ask why charting works? It is because the over 40% of all analysts use it and do make investment decisions using it, and that creates a self-fulfilling prophecy.

Now my own view is that we have NOT bottomed and I still believe it is likely we will go somewhere around 7,200-7,400 range because the decades of data shows the long trend line would cross at that level. I have also said we can get the same result by just staying at the current levels in the Nasdaq and Dow and achieve the same trend line by waiting for it to reach this level. But again, we will know a lot more and be able to predict even better after next week. Stay tuned and check here as I will post when news warrants regarding the market. If you get scared because the market in a given day is too volatile, check back here. In the mean time, have a nice weekend!