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Merrill's McCabe Sees Dow 11,000-11,500, Nasdaq 3400-3500

But the technical analyst also warned of choppy waters in the coming spring.

Analysts typically love to find the upside in the market. And this morning, Richard McCabe, chief market analyst at Merrill Lynch, did just that.

McCabe said in a research note that he's optimistic that a rally in equities will take place in the coming months, one that could take the

Dow Jones Industrial Average to 11,000 to 11,500 and the

Nasdaq Composite Index to 3400 to 3500.

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McCabe, Merrill's head of technical analysis, said the "Nasdaq's performance looks like its performance in April/May, when it made a modest new low in May vs. April, and then rallied in late spring/summer."

He notes that last Friday's Nasdaq rally was a strong starting point, although he also believes the thin volume made Friday less meaningful. He added that the December-to-January period tends to be a seasonally strong time for the stock market, but cautioned that the pattern doesn't always continue unchecked.

To wit, he fears that a near-term rally could give way to another period of weakness in the spring.

"The biggest question mark for this rally is the fact that investor sentiment indicators show an awful lot of complacency even though there's so much risk," wrote McCabe. "You're not getting the overly pessimistic signals you get at a strong bottom, like in 1998, 1997, 1994. The fear is, if we start a rally, sure, it could go on for a couple months, but could be subject to a relapse or a retesting in the late winter/spring."