Opinion: The average investor is making a classic mistake as the Dow marches to 30,000

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AFP/Getty Images -- Investors can avoid getting gored by scaling into the stock market.

An ‘all or none’ attitude could end up destroying their wealth

By Nigam Arora, Analyst

Mom and pop are making a classic mistake in investing at this time. The purpose of this article is to show the average investor that there is a better way.

The mistake is being made as Dow Jones Industrial Average DJIA, +0.58% marches to 30,000 and bitcoin BTCUSD, -12.55% falls to $10,000 and perhaps lower.

Last year when The Arora Report laid out a scenario for Dow 30,000 (see here), I got a fair bit of hate mail. Gurus who are now tripping over themselves to raise their targets were incredulous of that call. To be fair, the number of hateful emails was small compared to those I received when I gave a signal to sell gold (in the trading ETF GLD, -0.26% ) at $1,904 an ounce and simultaneously a signal to short-sell gold. At that time, everybody was bullish on gold. Subsequently, gold fell to under $1,100.

Before discussing the classic mistake and a better way forward, let us explore the market with a chart.

Chart

Please click here for the annotated chart of Dow Jones Industrial Average ETF DIA, +0.58% Similar conclusions can be drawn from the ETF SPY, +0.28% which represents the S&P 500 SPX, +0.27% ; the ETF QQQ, +0.53% which represents the Nasdaq 100 NDX, +0.51% ; and the ETF IWM, +0.35% which represents the Russell 2000 RUT, +0.35% For the sake of full transparency, this is the same chart that was previously published.

The chart shows the measured target for the Dow is 32,000. Be aware that the first strong support is the level from which the market broke out that is shown on the chart. This level is about 8,000 points below. This indicates that although the bullish case for the market remains intact, there is also high risk from a technical perspective.

Ask Arora: Nigam Arora answers your questions about investing in stocks, ETFs, bonds, gold and silver, oil and currencies. Have a question? Send it to Nigam Arora.

100%-200% return for 2018?

Fortuitously, the fundamental case for Dow 30,000 that I described about a year ago is still intact. To see the details of the fundamental case, please see a prior article by clicking here.

If the current trend continues, 2018 will show a return of 100% to 200%. How? If you multiply the average gain per day so far in 2018 by the number of trading days in the year, that’s what you get. However, that scenario is unlikely.

The classic mistake

There is anecdotal evidence that mom and pop are getting excited and…

Read more at MarketWatch here

Nigam Arora is an engineer, nuclear physicist, author, and entrepreneur and the founder of two Inc. 500 fastest growing companies. He is also the developer of the ZYX Change Method to profit from change by investing. The premise is that most money is made by predicting change before the crowd. Arora is the chief investment officer at The Arora Report and the editor of four newsletters that track the ZYX Change Method. Nigam can be reached at Nigam@TheAroraReport.com

Used with permission.