Stocks: Cautious Short-Term, Bullish Long-Term

You’re probably getting sick of hearing it, but my call for Dow 31,000 doesn’t seem so crazy anymore — in fact, it’s beginning to look like a conservative target. I’ve maintained my view that the Dow Jones Industrial Average would eventually hit 31,000 or higher over the next few years, possibly as soon as 2020.

In fact, since 2009, I’ve held steadfast that the U.S. equity markets have entered a bull market and that the Dow has huge upside potential going forward with the downside limited to mere technical corrections.

Why? It’s simple really; the most important economic and social/cultural SuperCycles are now converging again for the first time in more than 80 years.

Now factor in the war cycles, the upcoming sovereign debt crisis, and other geopolitical forces, like the looming collapse of the EU. And you can easily see why this generational convergence is driving massive amounts of capital into U.S. assets at a breakneck pace. Most of it is funneling straight into our stock markets — the most liquid on Earth — and it’s obvious why I’m so bullish.

Right now, this tsunami of social-economic change is striking mostly overseas, this next phase of the bull market is more about people getting really scared outside the U.S. and looking to park money somewhere safe.

There’s only one place in the world that has the liquidity, the safety, and the return that foreign investors want: Wall Street.

I remain extremely bullish long term on the U.S. stock markets, which is why my long-term target of Dow 31,000 may end up a conservative call … Dow 45,000 or even higher is a real possibility.

But no market moves straight up or down in one direction. Markets rise and fall just like the ebb and flow of the tides.

A pullback — even a very sharp one in our stock market — is way overdue.

Here’s why I remain cautious on stocks in the near-term and expect a temporary and healthy pullback:

• Bullish sentiment is extremely high — usually peaks before a downturn.
  
• Volatility remains low — The S&P’s 65-day rolling volatility is at a record low — this typically occurs ahead of a corrective phase.
  
• The Dow is trading 2,000 points above its 200-day moving average and the S&P 500 is 8% above its 200-day — another sign of an extended and overbought stock market.
  

Plus, my AI models are still showing that a pullback is coming. As you can see from the chart, the Dow should head lower and bottom in late March.

The lower it can get, the better. For members of Supercycle Trader and Real Wealth Report, I’ll be looking for buying opportunities at these lower levels.

Now is NOT the time to jump in with both feet. But when the time is right, my members will be the first to know.

My team, myself and my Artificial Intelligence, neural net, deep machine learning models are on top of it.

Best wishes,

Larry