Market Direction Mid Week Update

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That negativity toward the prospect of further gains appears to be growing with every move higher. But that prevailing fear is a reason one money manager cites for his being so bullish, as in “20,000 points on the Dow this year” bullish (see “the call” below).

The call

At a time when doom-and-gloomers are stealing most of the virtual ink, Zor Capital’s Joe Fahmy is heading in the other direction with a call he says “no one on Wall Street is making.”

Specifically, he is looking for the Dow to top 20,000 this year. “Of course, why would anyone have a positive outlook about the future when the media has pounded into our heads how miserable everything will be?” he said.

“In other words, learn to think for yourself and pay attention to what the market is ACTUALLY doing, not what you THINK it should do.”

He points to four reasons for making this call.

• Psychology — Nobody is looking for a big move higher, and that’s a positive, considering the market tends to fool the majority.
• Market resilience — Between the attack in Brussels and Fed officials calling for rate hikes, stocks could have easily fallen in recent weeks. They haven’t.
• Breadth — The number of S&P 500 stocks above their 50-day moving average went from less than 10% to above 90% in the past two months, a rare and bullish signal.
• The Fed — Fahmy doesn’t see higher rates this year, and that should be a tailwind for stocks.

“Most people who don’t agree with this call will state the following headwinds: China, oil, slowing earnings, and election uncertainty,” he said. “Keep in mind, the market is a discounting mechanism and has a mind of its own. It tends to trade on what will happen 6-9 months from now.”

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