Economic Recovery Underway?

The economic recovery maybe making its stand right here. Wall Street roared higher in a stellar week that saw the major indexes climb 10%. The Dow Industrial Average bounced off 6440 to close at 7224 on a wild 5 day swing. We got a long ways to go folks to return to Dow 10,000. Will we make it there this year?

With Federal Chairman Ben Bernanke saying that the recession will end in 2009 and that 2010 will be a year of recovery, right now is as good as any to ride the wave up. How high the markets go is uncertain.

This could be just a technical oversold condition and a justifiable bounce into a bearish trend. Its pretty clear that since 2006 we been heading nowhere but down ever since and until we break the downward trend, we are nowhere near recovery.

Traders look for market conditions when they fall 50-60% off their highs in the major indexes as a sort of cyclical trend. When that happens, its time to do the opposite and open up positions for longer term holds.

Dow 8500 looks to be doable in the next 3 months if sentiment starts to change for the better. A close over 7500 for March would be a definite win for the bulls and give them reason to push for a follow through. One thing though - too fast a pop to the upside would make for just as fast a drop to the downside.

Chart symmetry is important, especially when looking at long term monthly charts like the one above. You want to see a gradual uptrend take shape over time and not spiked bars. 500 Dow points per month to the upside over the course of the next 6-9 months would be the best scenario.