Stock Market Will Reach Bottom in October 2011; S&P 500 Will Be Worth Just 910

Looking for a Market Bottom? Try October 2011

August 10, 2011

WorstStockMarketCrashes.com - With turbulent trading activity, there is no sight of a bottom to the market in the near-term — volatility and the edginess in the markets does not help in forming the “Market Bottom” right now.

Tuesday August 9, 2011 — investors who a day earlier were wondering, “How low can it go?” are now posing a much different question: “Has the stock market hit bottom?”

The Dow Jones Industrial Average’s 430-point rebound — its 10th-best point jump and biggest since March 23, 2009 — has given investors hope that the market isn’t set for a replay of the 2008 stock swoon.

The massive price reversal after Monday’s 635-point massacre was not totally unexpected, given the intense selling pressure recently. The sharp downdraft in the broad market in the previous three sessions, the worst since the 2008 financial crisis, had created an “oversold” condition and a super-spike in investor pessimism, two conditions that are often present when big bounces occur.

Tuesday’s volatile session was a mirror image of Monday’s near-death experience for the Dow. The Dow skyrocketed 4% to 11,240, undoing much of the damage caused by its sixth-worst point decline ever a day earlier. All “30 Dow Stocks” were up after all 30 were down Monday.

This kind of volatility cannot last for long and will die down, however, no bottom formation will probably been seen until October 2011.

Even though the Fed’s statement suggested the economy would limp along for years, the market shrugged it off because the nearly 20% drop since its April high “had already priced” in the greater odds of another recession, said Pat Adams, portfolio manager at Dunham Loss Averse fund.

Market bottoms do not usually get formed with such a high degree of volatility — markets will have to settle to see the bottom. If the market rallied a few 100 points, there still would be no guarantee that a bottom had been formed. The market at present is unpredictable and can be called a trader’s graveyard.

The Coming 2011 Stock Market Crash

April 7, 2011

WorstStockMarketCrashes.com - Research says the S&P 500 will make a summer of 2011 run at the 2007 high of 1,565 but hit a “Mid-Year Peak” and then the “Stock Market Will Crash in 2011” and the midyear peak will probably mark the end of the cyclical bull market that began in March 2009 and the start of a new cyclical bear market.

The prediction of a bear market will soon be a painful reality as the inflated S&P 500 will be worth just 910 — get out before it tops over 1,500 on the charts as there is not much reason for it to climb higher with Bernanke’s low interest rate policy which is rapidly vaporizing and when it does — interest rates will rise and the United States stock market will crash.

With the 2012 elections right around the corner, there is one scenario the politicians don’t want to contend with — there is a high probability that a new cyclical bear market will begin this summer. Inflation jitters are spreading through the emerging markets, prompting China’s central bank to raise interest rates and a drought threatening the United States wheat crop will put further pressure on global food prices.

Grantham sees inflation and rising interest rates killing the lies, popping the bubble and ending the rally:

“As a simple rule, the market will tend to rise as long as short rates are kept low. This seems likely to be the case for eight more months and, therefore, we have to be prepared for the market to rise and to have a risky bias.”

With $107 billion at stake Grantham better be concerned. He predicted the 2008 meltdown, now sees a repeat dead ahead:

“Be prepared for a strong market and continued out-performance of everything risky, but be aware that you are living on borrowed time as a bull.”

Yes, the bubble will pop this year says Grantham:

“If the S&P rises to 1,500, it would officially be the latest in the series of true bubbles. All of the famous bubbles broke, but only after short rates had started to rise.”

So keep a close watch on those two tipping points in your planning: interest rates breaking to the upside and the S&P closing near 1,500. When inflation pushes interest rates up, they’ll choke off this bull market. If you’re active, better stop chasing higher returns, especially emerging markets.

Bottom line: In what sounds like a direct shot at super-bull Jeremy Siegel, Grantham says that GMO’s research warns that “the market is worth about 910 on the S&P 500, substantially less than current levels” just above 1,300 today.

The speed with which you should pull back from the market as it advances into dangerously overpriced territory this year is more of an art than a science, get the heck out of Wall Street’s stock market soon — maybe as early as July 4th but by October 1st you should probably be thinking much more conservatively because a stock market crash will happen in 2011.