Despite a strongly bearish long-term outlook, technicians Stephen Hochberg and Robert Prechter continue to see near-term upside for the market.
In The Elliott Wave Financial Forecast, a specialty service focused on a form of technical analyst known as Elliott wave theory, they explain, "Optimism is definitely on the increase, but it is not yet as the exteme that typically accompanies the end of a Primary degree rally.
"So notwithstanding near-term gyrations, the Dow should rise to the initial target, which remains in the 9,000 to 10,000 range.
"The current bear market rally will alleviate the feelings of fear and despair that predominated at the March lows, and the rise if making quick work of it. From mid-march to mid-May, the Dow's gains have produced a profound, collective sigh of relief.
"Optimism is certainly prevalent enough to fuel a pullback in stocks, but it isn't extreme enough to assure us that the Primary wave up is over.
"After surging to an all-time high of 89.53, the CBOE Volatility Index (VIX) made a series of lower lows and lower highs, falling to below 30.
"This drop brings the VIX back into the range that existed from August 2007 through September 2008, reflecting a lessening far of falling stock prices. Odds are that the VIX will fall into the low 20s or possibly even the teens prior to the end of the current bear market rally.
"The key point for now is that the ideal wave targets of 1000-1100 for the S&P 500 and 9,000-10,000 for the Dow have yet to be met, which means that nothwithstanding near-term pullbacks the blue chip indexes should eventually push higher."
Steven Halpern's TheStockAdvisors.com offers a free daily overview of the favorite stock picks and investment ideas from the nation's leading financial newsletter advisors.
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