Market projection and Paradigm Shift
It looks as though the rally from the March lows have stalled a bit over the last few weeks and the action yesterday looks like distribution, particularly in financials. The market could see another 5-10% downside and then come back to new highs by year’s end. There is one caveat though and a few numbers worth watching. If the S&P closes and remains below 926 and the Dow closes or remains below the 8550 area, there could be significant drops back to or exceeding the March lows at 667 ish on the S&P.
There is precedent for the so-called “W” bottom or double dip and we could easily see that here. Of note is that financials have been leading the rally and appear t be topping out. Actually a 5%-10% correction would be quite healthy and would allow for some mean reversion to build a better base for a good first half of 2010. Also, as mentioned in another post, emerging markets, China in particular have been dropping from topping over the last four weeks and as market leaders, spell trouble for the developed markets.
There is a longer term paradigm shift happening where China and India will be not the emerging/risky markets, but in fact, will be the new “developed” markets and the US and the West will be the “risky markets”. Unless you fully understand this paradigm change (as most talking heads and financial people do not) the next 25 years will be challenging for you. China and India will both have tremendous industrial production, internal consumption, internal staying power and growing accounting/reporting accuracy while the money-centers in the US and the West continue their corruption through the “Federal Reserve” system (which is neither “Federal” nor has any “Reserves”) and fleece the taxpayer. china and India have a long way to go in terms of transparency and accurate accounting practices, but they are improving, while the rest of the world is devolving into “me first, screw the taxpayer and the little guy”.
