Dow Jones Industrial Average Forecast May 9, 2013, Technical Analysis

Now that the Dow Jones has cleared 15,000, the Wednesday session looked positive as well as we closed at 15,105. This being the case, it appears that there is still positive momentum in the Dow Jones, and as a result we think that buying this market is the only trade you can do. However, we want to see some type of pullback in order to take advantage of the mass amount of traders who have missed this move.

It does of course makes sense that the Dow Jones would continue to grind higher, after all it is a collection of so-called “blue-chip” stocks. With that being the case, they’re all companies that people know and are fairly confident that are going to exist in a few years, and many of those will pay dividends as well. With that being the case, it makes the Dow Jones Industrial Average an excellent alternative to the bond market as the central banks around the world continue to buy sovereign debt.

With those low yields in the bond markets, it has pushed a lot of money into stocks such as IBM, J.P. Morgan, and Caterpillar. Anything with a steady and consistent yield is considered preferable to the treasury markets around the world right now, and as a result the Dow has been a major beneficiary.

However, that doesn’t mean that this market can’t pullback from time to time, and quite frankly it is healthy when it does. This market has had a nice run higher, and we do believe that there is even more left. However, we need to see that pullback in order to be confident enough to risk our capital at this point. The last thing you want to do is get in a situation where you buy stocks or an index fund, and find yourself waiting for the market to come back as it has just fallen off. By simply waiting for the pullback, you can also be assured that there are a lot of traders out there that want to be involved, and will more than likely join you.