From January’s fleeting, bombed-out lows, the Dow has rallied ferociously into a no-man’s land that lies within spitting distance of new record highs. It is bullish that the most recent thrust exceeded the trendline shown. How bullish? Bullish enough that we shouldn’t be too terribly surprised if the blue chip average goes on to exceed last May’s all-time high at 18351. That would represent a 638-point gain, or about 3.6%, over current levels. However, the Dow need only exceed November’s 17978 peak to generate a very powerful bullish impulse leg on the weekly chart. It would be quite powerful indeed, considering that it would not have corrected even slightly during the so-far nine weeks of the ascent.
The putative power of the rally would be even greater if, still without correcting, it were to exceed yet another ‘external’ peak at 18137 recorded last July. We should wait to see how things plays out before we jump back on the bullish bandwagon, but let me say up-front that I will let the charts guide me rather than my deeply held conviction that the bull market is a hoax, one that is soon to come crashing down as global recession spreads from Europe and China to the U.S. Naturally, I would be very strongly inclined to see a rally to new record highs as the ultimate bull trap. Even then, however, I would continue to call the turns from day to day, based purely on coldly technical indicators rather than on mere gut feelings.