The Dow Over 11,000

The Dow may hit and hold at 11,000, and may go above it (see Dow projections), but all 0000's are a psychological anchor point that often is followed by a drop. Couple this with a market that has been going up far too long without consolidation, and bears see a downside turn.

At the same time this week begins earnings reports, and we believe the first quarter will look good for a number of companies, which could bolster the market up.

Floyd's bet: Good earnings will bolster the market to as high as 11,176. Any bad earnings could take the market to consolidation of 3%, or near 10,841.

While most of the investing crowd is thinking optimistically, the market is apt to do the opposite. We are entering the 14^th month of a bull market, so the Obama haters may have a bit of an argument to deal with on what must come first to build jobs, and that’s a good earnings from companies.

Earnings reports begin this week.

Many people who bought in September 2008, when the Dow last closed above 11,000, and then rode the market down to the bottom in March 2009 may be inclined to sell at 11,000 to get back to break even.

Rising optimism also shows in that three of four stocks in the S &P 500 are overbought, says Bespoke Investment Group. Polls of financial newsletter editors (such as Blue Chip Options) have seen bullish sentiment rise seven of the past eight weeks.

Our Dow Projections see potential new market highs, and a tighter correction.

Earnings will show well, but the first “bad earnings” report from a Blue Chip stock this week we believe will trigger consolidation. From there we see new highs and a breakout to the market. From Wyckofff, there may be a “shake out” to the market to prompt profit taking, only to then see the market truly break out.

The following Big time stocks report this week, and trigger points that could move the market:

Alcoa earnings on Monday

International trade deficit could widen to 40 billion on Tuesday, analysts project

Consumer Price Index

JP Morgan-which may trigger the market downward, as it may not hit analyst earnings also on Wednesday

On Wednesday the beige book is out, YUM Brands posts results, and Thursday Google reports earnings after the market close.

On Friday Bank of America reports, and GE reports before the market opens.

These are facts that show consumers showing even more signs of deleveraging, or not borrowing:

5.6% seasonally adjusted annual rate of decline credit

A decline of 11.5 billion in consumer credit from the month prior, of the whopping 2.448 trillion out in consumer credit.

But there are more signs of a new “anchoring” to not spending, with a 9.4 billion decline in revolving debt, such as credit cards, the most in 3 months

Floyd Logic:

There is less spending because the consumer is paying off debt.

There is less spending because the consumer is not buying “new debt”

This means lots of stuff doesn’t sell

There are fewer jobs.

I mean, really, we are firing our teachers while we fight over how staggering the job loss is.

I contend under 10% unemployment will remain a GOOD recovery as the manufacturing and retail sector will only produce as much as sells, and the cycle of not spending is worldwide.

We may be entering an era of change in which we are not the “nouveua riche,” but the austere and humbled.

The hardest part as one trades the short term is anticipating the public reaction to something and how the media will actually “build frenzy” (not as liberal conspiracists but electronic journalism at its beginning.)

For those of you hold ETF’s long term, not to trade, some interesting results:

Passive ETF’s had a long period of slow growth, and active ETF’s will have a similar trajectory.

ETF assets have more than doubled in the past five years.

The highest risk bets, financials and real estate, showed the highest rate of growth in mutual funds.

We think there may still be advantages to financials, and are waiting for a buy point to recommend an option and stock advice on some banks that are still a steal.

But we will sit on our hands until we see a bit of savings to our first buy on the financial sector for the value investor.

We’ll let you know. Floyd calls this “watchful” of a venture, a stock, or the news around any part of how the stock moves.

Remember, we are often short term trading stocks, and options, and as we learn a stock’s range on a PNF chart it can be easy to trade IBM for $1.00 a share if one has good capital or margin, and really be investing safely.

As an example, IBM trades at 128.76. Someone purchases 5000 shares, or 643,800.00 and trades it in upswings for $1.00.

It’s how the option contract was created; greater risk, but greater reward, IF you can find a buyer.

We are also watchful of TLT, I shares Barclays 20+year Treasury Bond Fund, as T-yields go through a form of divergence. I think what I’m learning is that it soon time to be long TLT.

VIX is at two year low, which would normally mean the stock market will be subdued, and calm.

And as one views it, part of this is true, and our bull progression has seen many bumps.

We stay more in a trading range now. Again, hit by the psychological 11,000

Whatever move the market makes a converse move must still occur, or the rise will become euphoric, a sure sign of a shocking turn.

We only know what we know.

A rock is not hard.

Money is not real.

We are spiritual beings going through a human experience

People can become evil

Life is sometimes hard

Someone somewhere is singing a song.

These are things we must learn.