I would be more comfortable if we had one more all out mad rush for the exits. But with all this government intervention maybe we've seen it but in waves? Also if most think we are headed lower - and many here are old-timers that look at the market in terms of jobs, earnings, etc. which of course are yet to get much uglier - well most are usually wrong. We shall see.
If it were an option, I'd choose: "Move slowly up to eventually challenge prior highs as stocks pull another 1966-1982-type sideways market." I'm not expecting a true bull market for some time, but I think we're in the lower portion of the long-term range.
I'm looking at the dow chart following the stock market crash of october 1929 and I see some nice bull moves oct 29/1929 to oct 31: market rose 31% followed by a drop to a new low, then Nov 13 to Dec 9/1929: market rose 36% followed by a modest drop over the next 9 trading days, with another rise of 30% over the next four months(for a total rise of 52% from november's low)....From that high point every million dollars invested in the market would have on average lost about $860,000 by the time the market hit its real low two years and 3 months latter. The obvious point being that a general bear market can have some nice multi-month bull moves. on a bullish observation: in the last 108 years, 7 or 8 times(plus the one in 2007-2008), the market has lost around 40% to 48%(just short of losing "half" of its value from major highs) the only *ONE* time the market failed to REVERSE and head back upwards at such 40% to 48/49?% lows(FOR THE LONG-TERM REVERSAL) was in 1929-1930. And even then, the market rallied starting at just short of market-halving, for a 52% rise. With the fall from Dow 14198, the range of dow 7200 to dow 8600, would historically fit as a likely market turning point. However, with consumer confidence the lowest in 38 years, and all the shit going on with the credit crisis, I want to contemplate about potential parallels between present times and what I read in the following few paragraphs extracted from wikipedia's "Great Depression" article. (wikipedia"...Together, government and business actually spent more in the first half of 1930 than in the corresponding period of the previous year. But consumers, many of whom had suffered severe losses in the stock market the previous year, cut back their expenditures by ten percent, and a severe drought ravaged the agricultural heartland of the USA beginning in the northern summer of 1930. In early 1930, credit was ample and available at low rates, but people were reluctant to add new debt by borrowing. By May 1930, auto sales had declined to below the levels of 1928. Prices in general began to decline, but wages held steady in 1930, then began to drop in 1931. Conditions were worst in farming areas, where commodity prices plunged, and in mining and logging areas, where unemployment was high and there were few other jobs. The decline in the American economy was the factor that pulled down most other countries at first, then internal weaknesses or strengths in each country made conditions worse or better. Frantic attempts to shore up the economies of individual nations through protectionist policies, such as the 1930 U.S. Smoot-Hawley Tariff Act and retaliatory tariffs in other countries, exacerbated the collapse in global trade. ...There were multiple causes for the first downturn in 1929, including the structural weaknesses and specific events that turned it into a major depression and the way in which the downturn spread from country to country. In relation to the 1929 downturn, historians emphasize structural factors like massive bank failures and the stock market crash, while economists (such as Peter Temin and Barry Eichengreen) point to Britain's decision to return to the Gold Standard at pre-World War I parities ....Irving Fisher argued that the predominent factor leading to the Great Depression was overindebtedness and deflation. Fisher tied loose credit to over-indebtedness, which fueled speculation and asset bubbles. [8] He then outlined 9 factors interacting with one another under conditions of debt and deflation to create the mechanics of boom to bust. The chain of events proceeded as follows (1) Debt liquidation and distress selling (2) Contraction of the money supply as bank loans are paid off (3) A fall in the level of asset prices (4) A still greater fall in the net worths of business, precipitating bankruptcies (5) A fall in profits (6) A reduction in output, in trade and in employment. (7) Pessimism and loss of confidence (8) Hoarding of money (9) A fall in nominal interest rates and a rise in deflation adjusted interest rates.[8] During the Crash of 1929 proceeding the Great Depression, margin requirements were only 10%. Brokerage firms, in other words, would loan $9 for every $1 an investor had deposited. When the market fell, brokers called in these loans, which could not be paid back. Banks began to fail as debtors defaulted on debt and depositors attempted to withdraw their deposits en masse, triggering multiple bank runs. Government guarantees and Federal Reserve banking regulations to prevent such panics were ineffective or not used. Bank failures led to the loss of billions of dollars in assets.[9] Outstanding debts became heavier, because prices and incomes fell by 20â50% but the debts remained at the same dollar amount. After the panic of 1929, and during the first 10 months of 1930, 744 US banks failed. (In all, 9,000 banks failed during the 1930s). By 1933, depositors had lost $140 billion in deposits.[9] Bank failures snowballed as desperate bankers called in loans which the borrowers did not have time or money to repay. With future profits looking poor, capital investment and construction slowed or completely ceased. In the face of bad loans and worsening future prospects, the surviving banks became even more conservative in their lending.[9] Banks built up their capital reserves and made fewer loans, which intensified deflationary pressures. A vicious cycle developed and the downward spiral accelerated. This kind of self-aggravating process turned a 1930 recession into a 1933 great depression."
This time I feel the Fed/gov could've let the chips fall where they may and let banks consolidate or fail and allowed the $T's of dollars to protect (insure) public capital. paysense
Forget "fade the rally" or "fade the dip," just fade the poll! The second and third responses aren't materially different, BTW.
We have not seen the low in this market. Election day is 4 days away causing an influx of spending in the economy. You also have the bail-out and the new fed cut which can give a sudden jolt in the economy, but this batterry is flat and soon going to die. In my opinion (could be wrong) after elction day the market will be going down.
Please note this is a total guess but I am throwing it out there with the others. I do hope I'm wrong. It would be nice if this was equilibrium at this point. I am shorting this market rally. The reason I believe it's a rally is because the market is still reacting to good/bad news. I will probably end up regretting it. I think the multiples will be taken to around 10X like 2003. The housing mess started in 1995. In 2003, it still teetered back and forth until March, employment started to go back down again. Housing is why I think this will get worse and we haven't seen the employment drop significantly. You have three issues, CDS with no backing and a recession with housing dragging it down. It's one more factor from 2003 so the bottom is somewhere between 2003 - it went to 79XX and a percentage near 1995. More panic to ensue led by the HF that will be forced to sell. Who is going to pay someone 2% of the assets under management if most of the money is in cash or can't short. Steve Cohen may be the exception along with a few others who seem to be gathering assets at this point. By the way, "You may know who I am, I play an economist on TV."
If you just give an opinion for UP or DOWN then you'll have a very good chance to be right than giving a specific number like this. Giving a high certainty prediction like this is a sign of no clue, just random number given by a random thought.
In addition, when has the Dow moved up almost 80% from a low in 15 months? I don' t think it ever has. The Nasdaq has moved that much and more in the 90s (though I'm not predicting a repeat), but I don't think the stodgy ol' Dow will ever move that swiftly.