Dow targets 16,175

Price at time of writing – 15,484

Not surprisingly, US shares have outperformed most other global stock markets during the recent bout of weakness, and the Dow sits over 400 points higher since my 17 June update, close to its all-time intraday high.

The mini-correction too was much tamer, the Dow completing a healthy pullback of just 6.25% (half the 12.5% correction experienced by the FTSE 100). The US economy remains at the forefront of economic recovery, and US shares appear well placed to benefit from a far more pragmatic US central bank. My long recommendation remains intact.

The Dow has now completed a rise of 6.25% from its recent intraday low. A little hesitation could therefore be expected in the next few days, but should be largely ignored as irrelevant. The major target band (defined as 16,023-16,186) remains a compelling objective, even if it doesn't trade there in a straight line. We should not allow ourselves to develop a gung-ho attitude however, and must remember that the 690 points required to achieve the target of 16,175 equates to a mere 4.5% rise.

In an interesting similarity between the Dow and Germany's DAX index, a push to fulfil my targets would complete a rise of 150% (from the major lows of March 2009) on both of these indices. The last four years have certainly offered phenomenal opportunities to invest. 

Recommendation: Stay long. Target 16,175. Stop-losses can remain unchanged and activated only on momentum below 14,390.

Dow Jones chart

 

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