ombow: Space and time limit my response. I cannot condense a decade of studying the markets, reading at least 50 books on investing, economics and history, and spell out the details you would like. The worlwide economy has spent too much, borrowed too much and saved too little. This happens at the later stages of every secular bull market, or to put it in another term I have read...a period of prosperity. When good times have been going on for a decade or more people develop the idea that it can and will go on forever. They forget the bitter lessons of the past recessions. They leverage up...in housing, in equities, and in other risk assets. The borrow, borrow and borrow some more. Not everyone. But enough people. Housing went up because of government policies to promote home ownership and the cheap financing available. The increase in demand drove prices into a bubble. That bubble has burst and the result was the 2008-2009 crash. The government then went and printed money and borrowed more money to prop up the economy. That worked for a while as liquidity drove equities and gold higher. That is now wearing off and gold and equities have been in a downward correction since late April. We hit lower highs and lower lows in a stair step downward move. Look at the charts. This is not some OPINION I hold. It is a series of observed facts or events. I have studied stock market crashes through extensive reading. Secular bear markets do not come to their ultimate bottom until the dividend yield on large cap stocks collectively reach the 6% level. This has been the case 100% of the time going as far back as the New York Stock exchange has data to compare. It will not be different this time. In order to achieve this level of dividend yield, and looking at the behavior of past secular bear market crashes, and looking at the Fibonacci retracement patterns we are likely to see....the conservative estimate for the ultimate bottom of this 20 year secular bear market is in the 450 range. We could break 400 slightly if the government continues to do everything wrong. But 450 is the safest estimate. We will at least break 500, of that I am 100% sure. The rest of this year it will be difficult to persuade you. We will have a sell off shortly that will take out 2 important support levels. We have been correcting to lower and lower lows since we hit the intermediate peak of 1219 in late April. This latest relief rally only got us to 1099. (The previous one got us to 1131 on June 21st) On our latest corrective phase we made it down to 1010.91 on July 1st. So the next corrective phase (which we are in now or which we will be in soon) should take out the important psychological level of 1000 on the S&P and the technically important level of 978 which was the the August 17,2009 intermediate bottom. Once we cross that 978 level a certain percentage of technical traders will capitulate and sell, and perhaps go short. Once their selling dissipates there will be a strong relief rally which will take us back up the roller coaster to retest the 1100 level. That should occupy the market from August to perhaps the November election. It will be choppy but the direction will be upward. I will be long during this phase. I'll let you know when I have switched to the long side. This will set up a big drop for November and December and the next tecnical level that will be taken out will be 869.32 which is a stong resistance level from July 9,2009. We might take it out late this year, but it is more likely that we'll take it out early next year, perhaps in February. I think we'll see 2011 end with the S&P in the 600's. And I think the ultimate nadir will hit in the first or second quarter of 2012 down to the levels I have long predicted...the S&P between 400 and 450. I have laid out what I think is going to happen. Print it and see what transpires. Watch as we proceed in our stair step Depression II slow motion crash. Watch as we continue to correct to succesive lower lows and see relief rallies to lower and lower highs. It is easily observable. This is a slow motion event. But the end result will be the same. Lots of people will lose lots of money. And some people will make gobs of money. I hope to be in the second camp. We'll see soon enough.
AI
