What to watch

Are profit estimates for next year realistic? A huge amount of wealth rides on the answer to that question — and on the outlook for big U.S. tech companies. We continue to look for growers in the tech sector, and we’re willing to pay premium valuations for premium growers. But we’d feel better about our tech stocks if we had more confidence in other parts of the U.S. economy.

Accordingly, while we’d view a breakout above the S&P 500 Index’s all-time closing high of 6,144.15 as encouraging — especially if confirmed by strength in the Dow Industrials, equal-weighted indexes, and the S&P 1500 advance-decline line — we’re likely to maintain a somewhat defensive posture unless we see fresh highs in the economically sensitive Dow Transports.

Want stock market news and recommendations on a regular basis? Try Dow Theory Forecasts FREE for 30 days! Click here for a free trial.