Where is the market headed next?

I don't have to tell you that 2008 was one of the worst experiences in our financial life.  For the first time in over 100 years, the collapse totally neutered and distorted the ability of Psychology and Monetary to read the impending direction of future market trends-that had never happened before.  I am totally confident that the period from 2005 to 2009 will be recognized as a one-time anomaly that was distorted and manipulated and will not be allowed to occur again from many decades in the future.

Then this morning, as I opened the pages of the morning news and saw all of the ridiculous headlines, I got quite a shock!  However, I got back to some rational thinking as I saw a certain pattern being traced out on the S&P 400 and NASDAQ Composite indices.  As I mentioned in July, "the old masters of chart reading-Edwards and Magee-would love this bull market correction."  And if you think they would have been excited in July, well today, they are doing backflips of joy and anticipation.  Now that the S&P 400 and NASDAQ Composite have completed that July correction and have broken above the neckline of the reverse head-and-shoulders pattern we saw them tracing out, we are anxiously anticipating what will happen next.  Edwards and Magee cited this pattern as the most reliable technical pattern in the book, and gave a measurement technique that could be used to calculate a minimum target level.  Those targets take the distance from the shoulder level to the bottom of the reverse head, and then after the breakout occurs, you extend the same distance uup from the breakout level.  So what are those minimum levels for the S&P 400 and NASDAQ Composite?

To find out and view today's full Market Comment, click here.

Don Hays

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