Is the Dow Jones Heading for 14,100 or 12,000?

The Current Trend

Dow Jones Industrial is found today at 13.150. The long-term trend is certainly bullish, as the US economy and corporate news are both looking well. Especially as long as unemployment is falling and technology is pushing the economy to grow more. Looking at the whole picture, it is very possible that Dow Industrial during 2012 will test its historical record of 14,164.53 (October 9th, 2007). It shouldn’t be forgotten that Dow Industrial usually performs well during Election Years. Based on historical statistics, Dow performs well in the Election years and bad in the years after.

What could ruin this nice picture?

But what could ruin this bullish picture? The real danger for the US economy and the Dow Jones comes from across the Atlantic. The European economy is very weak at the moment, with zero growth and high unemployment. In addition, the southern countries (Spain, Greece, Italy, and Portugal), along with Ireland, face heavy deficits and are still considered very risky for lenders. These systemic fears lead to high government borrowing costs, which in turn create even larger deficits. Putting all the pieces together, we can conclude that things may get worse, especially for European banks. This situation poses a major problem for the global economy and could jeopardize the future of the American markets in 2012. If things go badly in 2012, the Dow will probably test 12,000.

Dow Jones Historical Line Chart (1928-2012)

The chart below shows the daily closing prices of the Dow Jones Industrial Average since its introduction in 1928.

Fibo Chart (1928-2012)

The following Trading Center Fibo chart is based on an innovative day-to-day market indicator we developed. The Fibo indicator focuses on the historical percentage changes in a financial security’s price. Unlike the Dow Line chart shown earlier, the Fibo chart can give a clearer picture of what has happened since 1928.

■ Trading Center (2012)

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