I think we could see all three of those things this week. Certainly by the end of the month. The Republican win in Mass puts the kibosh on the run away liberal agenda presented when the President and both houses are all dominated by one party.
I further predict that the mid-term elections will have the Dems having their majority pared back. This is the beauty of our US democracy. No extreme agenda can take hold. We as a people like incremental change. President Reagan had dismal mid-term elections as well, losing 26 seats in the house. President Reagan was a very popular President, regardless of how some on the left today would like to re write that fact. In a funny way, President Obama is a lot like Reagan. On a personal level, he is appealing, just like Reagan was. He is a smooth public speaker, Reagan was a former Hollywood actor, (granted a B-level actor) but that is good enough for American politics. 🙂
I really think this is the bit of bullish news which will have the large cash positions sitting on the sidelines, in effect, throw up their hands and start buying again. I have written about this idea for a few months now and I was waiting for a catalyst to bring on the flood of buying. I think this election may be the spark.

Not to mention the fact that we are going to see an 11,000 print soon enough. The low last March 2009 was 6440. I think a new high at 11,440 brings out the headlines in the papers. A nice 5,000 point, round number, good talking point, Dems will try to take credit, Republicans will try to take credit…That number, 5000, is too juicy not to attract attention from the press.

At that point, I think we will be ripe for a correction. Maybe a ten or 15 percent haircut. That would be just about perfect, because the average retail customer may jump back in then. Once again, timing the market just in time to buy a new high. Last March, they sold the new low. Its just human nature, and if it were not, we wouldn’t have market fluctuations. We’d just have perpetual 8 percent historical returns with now up-drafts or down drafts. But human nature does not work that way.

11,000 in the Dow, 1250 in the SP500, and 78 is breached as a resistance in the dollar index. That’s my opinion. Lets see how she turns out over the next 6 to 8 weeks.

Good Trading