What's Ahead for U.S. Stocks

Ok, a couple weeks into earnings season, and it is clear that many U.S. corporations and financial institutions are in a bit better shape than what the market thought in early March. That March low will not likely be tested, and it may be safe to assume that a new bull market for stocks has begun.

But, what does all that mean? I still think we are now in a similar period to the 1970's and early 1980's. The market will experience big moves up and down, but stay within a broad trading range of 15,000 on the Dow at the top to 6,500 at the bottom. I think this because of high overall commodity prices, huge government debt, high unemployment and an overexpanding government that will take jobs away from the private sector. Under the current administration, there is little incentive for corporations, businesses and wealthy individuals to be creative, since they will just pay more in taxes to the government to pay for all these new programs and the debt being run up in Washington and at the state level.

For now though, the market action in recent days has been impressive. A modest downside breakout has been followed by significant strength to new yearly highs in the Nasdaq averages. The only ominous sign I see in the averages is the lack of volume. There is not a huge commitment by instititutional traders yet. However, the trend is your friend, and general prices are going up. That means there have been nice trends in stocks, and those should continue.

Just be careful about making very long term bets at these levels. There are too many headwinds for the stock market going forward. I just don't see many people spending like that used to, and consumer spending is what ultimately drives corporate profits in the long run.

Stay Tuned!

Scott Cole
www.theultimatestocktradingsystem.com