The near term future

One of the things that is at the very least interesting is how short investor memories tend to be. After the March lows, we saw the Market climbed about 40%. In the beginning of June, we had a pause and a consolidation correction of about 5%. This type of pause is nearly inevitable since a certain number of investors are going to take profits, other investors don't want to buy at "inflated" prices and of course we always have our bearish friends who expect a total collapse at all times.

Now, many, many analysts predicted such a correction but as it was happening we sort of had panic in the streets. Even in the most persistent bull markets, there are pauses and dips along the way. Now when prices are going down and at the same time news comes out that disappoints a bit, such as the unemployment report, we have pundits ready to declare that everything is bad again and its probably time to buy lots of canned goods and dig a hole.

Naturally, the pause, consolidation, correction came to an end and with a bit of positive earnings reports the market rise has resumed. Now, based on my comparison to the early 70s and where I think earnings will be, I see a fairly rapid rise for the S&P to between 1100-1200. I don't think the economy is good enough to pass that level at this time and in fact, I would expect a bit of a correction near that level followed by a long period of range based training.

Now, my comparison to the 1970s and earning expectations are fairly speculative. I would say that once we get to the 1100 level, without a jump start we will see the market trade in a range of +/- 10%. The economy is still troubled and we need to get the next growth industry kicking in and we need to reform our tax system, or we face a fairly long period of stagflation, high unemployment and price increases.