This Rally Has Legs!

It's funny that the only one in this company who predicted this year that the market will hit 10,000 was the boss. Not Bruce Springsteen, but George Fontanills. In several conference calls and seminars he was quoted as saying that the market would hit 10,000 before taking out the March lows. Let's take a peek at two charts that may agree with George's predictions.

Chart 1: Dow Weekly Chart

This first chart is a weekly chart of the Dow. It shows the highs that were reached in 2007 as the Dow was trading at 14,500, followed by the drop into 6660 reached in March of this year. Attached to this graph is a Fib retracement line that tells us we are in between the 38-50% retracement lines. This is normal in a down move. Now, whether or not we are bouncing in a bearish trend or recovering into a new bull, this has given the bull a great target to shoot for. But has this market got legs? It might, but it might be running out of legs, too. The 50% retracement line puts us right above 10300.

Chart 2: Daily Chart

Which brings us to the daily chart. A classic wave 5 pattern that looks to be putting in the final touches. Most Wave 5 moves advance 60-100% of the Wave 3 move. Now the Wave 3 move turned out to be a 2000 point move from where it started. That means we should expect a 1200-2000 point move off of the Wave 4 lows occurring at 8300. Currently we are at 90% advancement.

Whether this move turns into an extended Wave 5 move or just fizzles out, you've got to give kudos to the brave souls who not only predicted this move, but actually traded it. I think in order to profit from this move, you had to first see the huge rally that occurred in July, and using tools, looked at the extending possibility before trading it. Again, my hats off to you, as well as George's" he was there with you. And then there's me" standing at the front of the line that reads EXIT"

Tom Gentile
Chief Strategist
Profit Strategies Group, Inc.