In the days before Google maps, giving directions was an art. The best directions included advice for when you had gone too far and for when you had taken a wrong turn. The worst directions included the phrase "You can't miss it. "
Despite advances in technology, providing long term outlooks for the market remains in a pre-Google age. They are either too tentative to be useful– the market will reach 6,000 in 2017 when its currently trading at 5900 – or outrageously optimistic – the market will reach 7,500. Often it is fiction built of guesswork and that's if the method is explained at all. In most cases, it is a call based on faith with no way-points to use to decide if the call is correct or failing.
Chart analysis provides us with an objective methodology and identifies trigger points and way points which confirm when we have taken significant steps towards the target conditions, or when the conditions have failed. This includes the Nikkei target of 19,000 set four weeks ago and achieved this week. In the past 12 months 72% of the targets we identified in this column using these methods have been achieved.
We are traders so our usual focus is on short term trades lasting weeks or perhaps months. This week we look at the framework for longer term targets in the US Indices. The same analysis methods are applied to the Dow, the
S&P and the NASDAQ and use a monthly chart.