6:50pm (EST)


There were a lot of skeptics last week calling for a market pullback and we felt alone in our quest to join the bulls for Dow 11,000.  Each and every week we go over the numbers and we do a lot of research based on what we see happening around us.  We have been super bullish as many of you know since February and that has carried over since last August when we were about the only newsletter calling for Dow 10,000.  

We can go even further back to the end of March 2009, a little over one year ago, when we had this to say when the Dow was just under 7,800 and had rallied 500 points for the week:

“Our indicators are still saying we go higher but we are certainly due for a pause. The current market environment seems to be taking in the bad news as well as the good. We are seeing rallies on good news, and small rallies on bad news with no major sell-offs.

We have talked about the Dow 7,600-7,800 and it now looks as though 7,600 is short-term support. For the S&P 500 we were targeting 800 and we held that level all week which now makes it support.  For the Nasdaq, the 1,500 level will have to hold.

We haven’t had a significant sell-off but don’t count one out. The major indexes have broken through their 50-day moving averages and held which is normally bullish. In the past, we have tested these levels only to see the market retreat and re-test them so that is in the back of our mind.

However, now that we are above these levels we can target 8,000 for the Dow with the possibility of 8,300 being in the cards. For the S&P 500, we could get a run to 875, and maybe 900 if first quarter numbers are good. The Nasdaq could make a move to 1,650-1,700 if the stars align just right.” (END)

From our 8/29/09 Weekly Wrap when the Dow was at 9,500:

“The market has had an incredible run and the key levels we are watching are as follows:

For the Dow (currently 9,505), watch for 9,625 which was the November high.  A run above this level clears the way for…dare we say it….Dow 10,000.  There is support at 9,000 but a break below 8,900 would send up a warning signal.

As for the Nasdaq (2,020), it looks like 2,100 is smooth sailing as long as the bulls continue to run this week.  Above that, we get choppy but we could get a run to 2,275.  Support is at 1,930 and further down at 1,800 or so.  A break below that could lead to 1,600.

The S&P 500 (1,026) could easily make a stab at 1,100 now that it has surged past 1,000 but 979 will be key support near-term.  There is really nothing stopping the index from hitting 1,150-1,175 which is where headwinds will pick up.” (END) 

We raised those targets on March 7th, 2010 when many of the market pundits were calling for a pullback or a correction: 

“If we do get another week-long rally, then our NEW short-term targets would be Dow 11,000; S&P 500 1,200; Nasdaq 2,400.” (END)  

The talking heads were telling you not to buy last week into the close and that the Dow and other indexes had reached a peak.  They pointed at the strong resistance levels and said they would wait for better entry prices to buy into this market. 

Greek debt, China threat, rising oil prices, Fed statements, Benanke, Greenspan, low volume, no volume, explosions…you name it; the market saw it.  In fact, it was one of the most exciting weeks we have ever had trading.  And we loved every minute of it.

We were on pins-and-needles going into the final how of trading as we have some open trades that were banking on a higher finish.  The bulls did not let us down.

The Dow hit a peak of 11,000 about 5 minutes before the closing bell and ended the day at 10,997, a gain of 70 points, or 0.6%.  It marked the highest the index has traded since September, 2008.  This was also the weekly gain as the Dow went into Friday exactly where it closed the week before and is up over 10% since early February.

The S&P didn’t hit our 1,200 mark but ended with an 8 point win, or 0.7%, and finished at 1,194 and near its high for the day.  For the week, the index added 16 points, or 1.4% and is up 12% over last two months.

The Nasdaq lead the race higher once again as it added 17 points, or a little over 0.7%, and settled at 2,454.  It was the highest close for Tech since August, 2008.  For the first full week of April, the index jumped 51 points, or nearly 2.2%, and is up 15% over the aforementioned time frames.

These technical levels are important although the market doesn’t care because we still have room to run.  Yes, we think the rally can last for a few more weeks and maybe into May before we see a pullback, if any.  Folks, just because the market is at “one-year” highs doesn’t mean we can’t go to “two-year” highs. 

You can bet anyone who is short the market has got to be having second thoughts and they could panic and start buying their positions back come tomorrow’s opening bell.  Another thing to remember…When the market finally bottomed, the sell-off was way overdone.  Now that we are rallying back to these resistance levels, the market can also overshoot to the upside.

If that is the case, then we could easily see Dow 12,000; S&P 1,300; and Nasdaq 2,800 sometime in 2010.  For that to happen we think unemployment will need to be under 9% by the end of summer.  At least that is what we see.

Call us crazy but people thought we were nuts when we said Netflix (NFLX, $82.42, up $0.59) was going to $100 by June back in November or that Imax (IMAX, $17.11, down $0.44) was headed to $20 when shares were at $3 a couple of years ago.  Although we are an options newsletter, a lot of people use us for great stock picking ideas.

We aren’t sure how much higher the market could be headed over the near-term because it will depend on how much new money comes into play and if the bears wake up.  If the bulls can continue the momentum we could see a run to Dow 11,300-11,400; S&P 500 1,250-1,275 and Nasdaq 2,550-2,600 over the next few weeks. 

As far as earnings, they will play an important role this week on which direction the market takes from here.  Here is what’s on tap this week (quotes are from Friday’s close): 


Monday:  Alcoa (AA, $14.39, down $0.48), First Bancorp (FNLC, $15.74, up $0.15), Frischs Restaurants (FRS, $19.97, down $0.60), Heartland Express (HTLD, $16.19, down $0.18), JB Hunt Transportation (JBHT, $36.10, up $0.12), Kinder Morgan Management (KMR, $59.83, up $0.13), National Bankshares (NKSH, $28.06, down $0.25) and Polycom (PLCM, $30.50, up $0.13).

Tuesday:  CSX (CSX, $52.96, down $0.02), Fastenal (FAST, $51.15, up $0.34), Healthcare Services Group (HCSG, $23.04, up $0.07), Infosys Technologies (INFY, $60.96, up $0.65), Intel (INTC, $22.55, up $0.24), Linear Technology (LLTC, $29.11, up $0.55), Talbots (TLB, $14.35, up $0.16) and Westamerica Bancorporation (WABC, $57.44, down $0.19).

Wednesday:  Charles Schwab (SCHW, $19.23, up $0.11), Hooker Furniture (HOFT, $16.91, up $0.15), iGate (IGTE, $10.57, up $0.20), JPMorgan Chase (JPM, $45.98, up $0.22), W.W. Grainger (GWW, $114.77, up $0.60) and Yum! Brands (YUM, $40.70, up $0.63).

Thursday:  Alliance Financial (ALNC, $29.46, up $0.72), Commerce Bancshares (CBSH, $41.93, up $0.32), Fairchild Semiconductor International (FCS, $10.88, up $0.34), Google (GOOG, $566.22, down $1.27), Intuitive Surgical (ISRG, $350.62, up $10.52), PPG Industries (PPG, $68.68, up $0.75), Titan Machinery  (TITN, $14.05, up $0.24) and Valmont (VMI, $85.12, up $1.71). 

Friday: Advanced Semiconductor Engineering (ASX, $4.79, up $0.12), Eastern Virginia Bankshares (EVBS, $7.50, up $0.04), Gannett (GCI, $17.79, flat), General Electric (GE, $18.52, down $0.04), Genuine Parts (GPC, $43.25, up $0.26), Mattel (MAT, $23.18, down $0.31) and Southside Bancshares (SBSI, $20.99, down $0.48).

We will be back in the morning with a full outlook for the week but we are expecting some follow-through from Friday’s close.