I think a lot of people would be very surprised to see another month of equities rallying but the forecast I have been publishing clearly suggests this. Tonight I'd like to back off a bit and look at the longer term trend to give readers (both experienced and non) a general sense of what may lie ahead.
1.- LONG TERM FORECAST
I've provided a chart below that best describes what I feel is going to occur over the coming 12 months. Incidentally, the dates on the chart are based entirely on the position trading forecast I use.
Upon inspection you'll note I've divided the chart into 4 main components which I describe below.
Section 1 - Present to August 7, 2009
This phase of the projection is the last ditch effort to keep this market up before the gale wind forces of the current bear market finally resume. In all honesty, however, this is the part of the forecast I am least comfortable with, particularly when one considers the predominant complacency in the market at the moment. So I wouldn't be taking any long positions at this point, but the forecast is what it is.
Section 2 - August 7, 2009 to October 29, 2009
I expect this period to be a complete bearfest especially in comparison to what we've seen over the past 3 months. The majority of a trader's 2009 profits will likely occur during this very tight window of opportunity so I encourage you all to prepare yourself mentally if/when we get a rally into the first week of August. This will be THE opportune time to finally 'load up' on the short side.
Section 3 - October 29, 2009 to January 13, 2010
This will be the final corrective phase of the bear market before the mother of all plunges. I hesitate to say this but if you've ever wanted to refinance the house and go all in...this would be THE time to do it. I say this quite facetiously but you get the idea.
Section 4 - January 13, 2010 to XXXX XX, 2010
Four words: A bear's ultimate dream. If you have ever wanted to trade a market that was even better than 2008 then this is it. The sell off in 2010 will be of absolute epic and generational proportions. 2008 will pale in comparison to the 2010 sell off but will be much shorter in duration. Many, many, many downward cycles converge starting in mid to late 2009 and accelerate into 2010. It is literally the perfect financial storm - but it will occur in a blink of an eye.
In nominal terms, I expect the bottom of the bear market to occur in mid-to-late 2010 and provide smart investors the buying opportunity of a lifetime. Things like high inflation (the US government is going to print money like you've never seen) and a recovery are likely at that point but not sooner. You'll want to invest in assets like commodities.
2.- ES FORECAST
Today was a very good day for my forecast. I hardly ever take credit for nailing a turning point in the market when all I did is follow my system but today it acted well. It foresees some choppy trading with 900 as support...let's see if it holds.
