Today, I'll attempt to evaluate the Dow Jones Industrials charts and see if I can determine what is going on with the market and how far it might be likely to run. Applying the Elliott Wave theory: After reviewing the charts , it appears as if the first wave started in March of 2009 and lasted for about 3 months before pulling back during wave 2. Wave 3 then started in July 2009 and ran until Jan 2010 (6 months). Wave 3 is generally longer than wave 1 and 5 so this supports the hypothesis. Wave 5 (now in full swing) started in Feb 2010. If it sticks to the pattern, Wave 5 should last thru April and end in May, when a market pull back starts. It still shows the potential to continue the advance since it is still shorter in length than wave 1. Maybe the conventional wisdom of "Sell in May and go away" will hold true this year. That does not mean that the bull market that started in Mar 2009 will come to an end, but it does mean that it would not be a bad time to pull some chips off the table. Selective money making opportunities will still exist, and if you hold onto your stocks, covered call strategies should continue to pay off during the summer months. But after a protracted run like we have had, a pullback of 10 to 20% is not out of the question. I have generally found that I would have been better off selling the stock and buying it back later than selling covered calls on it (meaning that the profits made from selling the covered calls were less than the decline in the price of the stocks held). Of course, if you are trading in a tax advantaged account (self directed 401 k, IRA , etc) vs a taxable account, the type of transaction does make a difference since each individual's circumstances may vary.
Another interesting thing to notice is the diminished volume in the market (daily chart) as compared with a year ago. So theoretically, in the next run (fall 2010), we can see a sharp run in the market accompanied with large volume that may take us to the previous highs. Continued strength in the markets could then help us breakthru the resistance and into the era of new market highs. But that is dependent on a lot of "ifs" and time will tell whether it comes to play out. Looking at the monthly chart, it also appears that we are in the area of high resistance around the 11,250 - 11,400 area which also marks a 66% retraction point from the market bottom. But that resistance may not exist given that it was almost 10 years ago when that point was established.
Today, I'll attempt to evaluate the Dow Jones Industrials charts and see if I can determine what is going on with the market and how far it might be likely to run. Applying the Elliott Wave theory: After reviewing the charts , it appears as if the first wave started in March of 2009 and lasted for about 3 months before pulling back during wave 2. Wave 3 then started in July 2009 and ran until Jan 2010 (6 months). Wave 3 is generally longer than wave 1 and 5 so this supports the hypothesis. Wave 5 (now in full swing) started in Feb 2010. If it sticks to the pattern, Wave 5 should last thru April and end in May, when a market pull back starts. It still shows the potential to continue the advance since it is still shorter in length than wave 1. Maybe the conventional wisdom of "Sell in May and go away" will hold true this year. That does not mean that the bull market that started in Mar 2009 will come to an end, but it does mean that it would not be a bad time to pull some chips off the table. Selective money making opportunities will still exist, and if you hold onto your stocks, covered call strategies should continue to pay off during the summer months. But after a protracted run like we have had, a pullback of 10 to 20% is not out of the question. I have generally found that I would have been better off selling the stock and buying it back later than selling covered calls on it (meaning that the profits made from selling the covered calls were less than the decline in the price of the stocks held). Of course, if you are trading in a tax advantaged account (self directed 401 k, IRA , etc) vs a taxable account, the type of transaction does make a difference since each individual's circumstances may vary.
Another interesting thing to notice is the diminished volume in the market (daily chart) as compared with a year ago. So theoretically, in the next run (fall 2010), we can see a sharp run in the market accompanied with large volume that may take us to the previous highs. Continued strength in the markets could then help us breakthru the resistance and into the era of new market highs. But that is dependent on a lot of "ifs" and time will tell whether it comes to play out. Looking at the monthly chart, it also appears that we are in the area of high resistance around the 11,250 - 11,400 area which also marks a 66% retraction point from the market bottom. But that resistance may not exist given that it was almost 10 years ago when that point was established. 
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