The INDU is headed for 9700, which is a 10% pullback from the top at 10700.  This is a healthy correction and has been needed for awhile.  The volume accompanying the current bearish movement confirms the investment community is definitely participating.  This retracement has not surprised us as we have adjusted our positions to take advantage of the move.  We are longer term bullish, so in our opinion, this move is no need to panic. The analysts who are predicting a double dip recession are still alive and well however, we are not in that camp.

The SPX is the same story as the INDU.  Look for 1030 and then 975 on the pullback and then hop back on board the “Bull Train”.  There will be some buying opportunities as the index begins to bottom.  As mentioned in last week’s post, do not underestimate the power of momentum.  There were some that felt that the consolidation on Monday through Wednesday was a bottoming sign which was misguided.  You have to expect periods of consolidation on the way down so don’t be fooled.

The COMPQ fell hard out of the Bear Flag on Thursday and Friday on increasing volume.  We are targeting 2114 and then 2024.  The COMPQ has posted impressive gains since the March 2009 bottom and it is not a surprise to see the index leading the major averages lower.

 The broad market finished lower in January, which does not bode well for those that believe that ’how January goes so does the year’.  We happen to believe that this move is a short-term bump in the road and will provide us with some outstanding buying opportunities going forward.  The key to success in trading is to follow the market.  Don’t fight it with your preconceived beliefs.  Although, we have definite ideas about where we feel the market is going, we will submit to the market and follow it because in the end, the market is always right.  We would rather make money than stubbornly trying to be right.  We wish you a fantastic week ahead!

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