Counterpoint to the Dow 13,750 target

This post is being done as a sort of a "whoa, not so fast!" counterpoint to the bullish short term projection of 13,750 and other conclusions noted in this month's Biiwii Letter. Some people get aggravated with technical analysts when they play both sides of the fence, but I would rather put my money on probabilities than a crystal ball reader. This is all about probability and ongoing analysis and revision.

In that regard, here is a daily chart showing the bullish Dow and several challenges it faces in attaining the measured target off the inverted H&S-like bottoming pattern. I am using the weekly breakout above resistance from this pattern along with a Dow-Gold ratio that implies more upside as the main bullish components for nominal Dow. But as noted in the letter, I don't see gold and especially gold stocks as being broken, even for the short term. So it is possible although I wouldn't say probable that there is another leg up in gold stocks after filling all those gaps on Friday. Remember, gold stocks have been acting nicely counter-cyclical lately.

As for the Dow chart, note that the 38% Fib retrace level has been taken out with two more that need to be surmounted. Also, the blue downtrend line and the red dotted neckline (of the H&S top that never quite reached the measured target of 11,000) will present challenges. On the plus side, the VIX has broken down at the same time the casual market watcher remains convinced of a bear market and tanking economy. We shall see how much laughing Fast Money does and how much crowing Mr. Kudlow does in the near future. All we are doing is recalibrating emotions and mindsets all around. The question is, for how long?