Stocks May Move Much Higher

06/04/2007 12:00 am EST


Mark Leibovit

Chief Market Strategist,

Mark Leibovit, chief market strategist for, says the market may post big gains despite continued weakness in housing and he sets a new target price for the Dow.

Housing is sinking and the ramifications for American's personal wealth and jobs are sinking along with it. There has to be some form of counterbalance and that is the stock market. Get the momentum going, get investors back in the market making money, make Americans feel rich again, despite their homes' [falling prices].

Remember, a vast segment of America has their future tied to their retirement plans-most of which is invested in the stock market. Also, the stock market has for most of this century acted as leading indicator for economic growth. In addition, it provides a psychological lift to both investors and business decision makers alike. A higher market is a self-fulfilling prophecy for the rest of the economy.

The persistent jabbering regarding a recession or economic slowdown may be sector specific-no doubt, but a higher market will rebalance the weak against the strong with a net positive result.

By virtue of Friday's volume patterns, my proprietary Volume Reversal (tm) analysis has now generated a new and stunning upside target for the Dow Jones Industrial Average. Are you ready for this one? It is 14,800! There is no specific time associated with such a projection, but I would submit that within 12 to 18 months such a target could readily [be achieved] barring a cataclysmic event.

The bigger danger is when will vertigo set in for this market? Looking at the charts, I don't see any parabolic advance (blow-off action), no signs of vertigo. What I do see is a steady up-trending market on the daily and weekly charts-a market that could conceivably continue moving higher for quite some time.

The one possible 'monkey wrench' is the US/China economic [situation]. Any serious sabre rattling-mostly coming from Democrats-might unnerve the markets. Paying close attention to the Shanghai Market and especially the US Dollar Index should give us some clue as to what may be occurring.

Japan is not likely to raise interest rates any time soon, and when they do we may see a quarter-point increase-still a strong catalyst for continued "carry trade" financing of worldwide securities. However, as I've mentioned, talk of US trade protectionism could sink the entire Asian stock market along with the US. If such action gets serious attention by Congress, the 'Shanghai Express' could be in for a derailment.

We are looking for gold's activity to be choppy over the near term as economic data and the subsequent direction of the dollar [needs] to be sorted out by the markets. Long-term players in gold should continue to hold, but the faster money needs to analyze gold and take positions on a short-term basis only right now.

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