Confused About Where the Stock Market is Headed Next – So Are the Experts

The brief excerpt below is from an excellent WSJ article concerning the debate about where the stock market is headed next. The full article is a very good summary of opposing positions on the future of the current bull market. The entire article is worth a read.

Last week's stock-market carnage -- the Dow Jones Industrial Average fell 4.23% for the week to 13265.47 -- seemed an overreaction to most analysts, who focus on fundamentals like corporate profits and interest rates. The global economy continues surging, they point out, while most market interest rates remain low by historical standards. What matters, they say, is whether the credit crunch, caused by ill-conceived loans to home buyers and businesses, starts to interfere with growth and interest rates.

But another, less fashionable, breed of analysts sees storm warnings. Known as technical analysts or chartists, because they plot and compare a wide range of sometimes-arcane market data on graph paper and spreadsheets, they liken their work to hurricane tracking. They can see a pattern building, they say; the trick is distinguishing a brutal Category 5 storm from a less-severe Category 2.