Dow @10K >>> Possibilities of success and failure

We remain in the high-risk period following the end of the third quarter. The Dow is also testing its key resistance level of 10000. Upward breakout would confirm a bull market, while respect of these levels would warn of a secondary correction.

In the long term, the US economy, relatively speaking, is not out of the woods >>> not by a long shot. Global analysts had analyzes 12 of the largest episodes of hyper-inflation in the last 20 years.

All were caused by financing huge public budget deficits through money creation and they concludes that the tipping point for hyper-inflation occurs when government deficits exceed 40% of expenditures.

US budget deficits of 40 per cent or more are projected for 2009 and 2010, a clear warning despite the current credit contraction. If hyper-inflation occurs, traders would want to be short on bonds and long on real assets such as stocks, precious metals and real estate.

The recent surge in gold indicates that inflationary fears are growing.

Dow @10,000

The Dow found support at 9500 before rallying to test 10000. Reversal below 9500 would indicate a secondary correction, while breakout above 10000 would signal another primary advance.

TMF 21 or Twiggs Money Flow (21-day), however, still shows a bearish divergence and reversal below zero would indicate a correction.

In the long term, breakout above 10000 would offer a target of 12000*; failure of support at 8000 is unlikely, but would signal reversal to a primary down-trend.

S&P 500
The S&P 500 is similarly headed for a test of 1100. The sharp fall on Twiggs Money Flow (13-week) indicates strong selling pressure. Failure of support at 1020 would signal a correction. In the long-term, recovery above 1100 would signal another rally to test the upper channel around 1200*; while failure of support at 900 would indicate reversal to a primary down-trend.