Originally shared by Before It’s News
Is a Stock Market Crash Imminent or Does this Stock Market Bull Still have Legs?
In January bullish sentiment suddenly soared to a six-year new high and at that point, we knew all was not well. For until that moment the market was soaring to new highs on negative sentiment, illustrating the principle of “a market climbs a wall of worry” to its fullest, but that all changed in January.
Interestingly, the Dow missed the low-end targets we issued in Nov by 1400 points, so does that mean the upward journey is over. Before we answer that, understand that nothing trends up in a straight line; a healthy market always lets out doses of steam on its upward journey; sometimes the pullbacks are minor, and sometimes they are very strong. At the time we noted that the markets were extremely overbought and even went on to issue possible downside targets if the markets decided to let out some steam.
While the Dow is trading in the extremely overbought ranges, any pullback will most likely end in the 21,000-21,500 ranges. For the correction to pick up steam, it would need to close below this level on a weekly basis. As the trend is still positive, the odds of the Dow crashing are very low. At the most, the Dow would test its breakout point which falls in the 18,900-19,200 ranges unless the trend were to turn negative suddenly or the masses suddenly embraced the market with gusto. At this point, the trend is strong and showing no signs of weakening. Remember that the markets can remain irrational for much longer than most traders can remain solvent by betting against it.Tactical Investor