Most Popular
1. It’s a New Macro, the Gold Market Knows It, But Dead Men Walking Do Not (yet)- Gary_Tanashian
2.Stock Market Presidential Election Cycle Seasonal Trend Analysis - Nadeem_Walayat
3. Bitcoin S&P Pattern - Nadeem_Walayat
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
4.U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - Raymond_Matison
5. How to Profit from the Global Warming ClImate Change Mega Death Trend - Part1 - Nadeem_Walayat
7.Bitcoin Gravy Train Trend Forecast 2024 - - Nadeem_Walayat
8.The Bond Trade and Interest Rates - Nadeem_Walayat
9.It’s Easy to Scream Stocks Bubble! - Stephen_McBride
10.Fed’s Next Intertest Rate Move might not align with popular consensus - Richard_Mills
Last 7 days
US Housing Market Analysis - Immigration Drives House Prices Higher - 30th Sep 24
Stock Market October Correction - 30th Sep 24
The Folly of Tariffs and Trade Wars - 30th Sep 24
Gold: 5 principles to help you stay ahead of price turns - 30th Sep 24
The Everything Rally will Spark multi year Bull Market - 30th Sep 24
US FIXED MORTGAGES LIMITING SUPPLY - 23rd Sep 24
US Housing Market Free Equity - 23rd Sep 24
US Rate Cut FOMO In Stock Market Correction Window - 22nd Sep 24
US State Demographics - 22nd Sep 24
Gold and Silver Shine as the Fed Cuts Rates: What’s Next? - 22nd Sep 24
Stock Market Sentiment Speaks:Nothing Can Topple This Market - 22nd Sep 24
US Population Growth Rate - 17th Sep 24
Are Stocks Overheating? - 17th Sep 24
Sentiment Speaks: Silver Is At A Major Turning Point - 17th Sep 24
If The Stock Market Turn Quickly, How Bad Can Things Get? - 17th Sep 24
IMMIGRATION DRIVES HOUSE PRICES HIGHER - 12th Sep 24
Global Debt Bubble - 12th Sep 24
Gold’s Outlook CPI Data - 12th Sep 24
RECESSION When Yield Curve Uninverts - 8th Sep 24
Sentiment Speaks: Silver Is Set Up To Shine - 8th Sep 24
Precious Metals Shine in August: Gold and Silver Surge Ahead - 8th Sep 24
Gold’s Demand Comeback - 8th Sep 24
Gold’s Quick Reversal and Copper’s Major Indications - 8th Sep 24
GLOBAL WARMING Housing Market Consequences Right Now - 6th Sep 24
Crude Oil’s Sign for Gold Investors - 6th Sep 24
Stocks Face Uncertainty Following Sell-Off- 6th Sep 24
GOLD WILL CONTINUE TO OUTPERFORM MINING SHARES - 6th Sep 24
AI Stocks Portfolio and Bitcoin September 2024 - 3rd Sep 24
2024 = 1984 - AI Equals Loss of Agency - 30th Aug 24
UBI - Universal Billionaire Income - 30th Aug 24
US COUNTING DOWN TO CRISIS, CATASTROPHE AND COLLAPSE - 30th Aug 24
GBP/USD Uptrend: What’s Next for the Pair? - 30th Aug 24
The Post-2020 History of the 10-2 US Treasury Yield Curve - 30th Aug 24
Stocks Likely to Extend Consolidation: Topping Pattern Forming? - 30th Aug 24
Why Stock-Market Success Is Usually Only Temporary - 30th Aug 24
The Consequences of AI - 24th Aug 24
Can Greedy Politicians Really Stop Price Inflation With a "Price Gouging" Ban? - 24th Aug 24
Why Alien Intelligence Cannot Predict the Future - 23rd Aug 24
Stock Market Surefire Way to Go Broke - 23rd Aug 24
RIP Google Search - 23rd Aug 24
What happened to the Fed’s Gold? - 23rd Aug 24
US Dollar Reserves Have Dropped By 14 Percent Since 2002 - 23rd Aug 24
Will Electric Vehicles Be the Killer App for Silver? - 23rd Aug 24
EUR/USD Update: Strong Uptrend and Key Levels to Watch - 23rd Aug 24
Gold Mid-Tier Mining Stocks Fundamentals - 23rd Aug 24
My GCSE Exam Results Day Shock! 2024 - 23rd Aug 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Dow Jones Stock Market Index Forecast 2009 - Update1

Stock-Markets / Stocks Bear Market Feb 25, 2009 - 02:37 AM GMT

By: Nadeem_Walayat

Stock-Markets

Diamond Rated - Best Financial Markets Analysis ArticleThis analysis seeks to update the forecast of 20th January 2009 for the Dow Jones stocks index in the light of subsequent volatile price action.

The 2009 forecast is ( Dow Jones Forecast 2009 - 20th Jan 2009) - In Summary , I do not know at precisely what price level the Dow will make a low during 2009, my best estimate at this time is 6,600, but I am expecting that it will mark the start of a multi-year bull market that will eventually make 2008-2009's price action appear as a mere minor blip, much as the 1987 crash appears on today's price charts.


FORECAST DEVIATION - The DJIA closed last night at 7,350 which is significantly below the forecast trend that targets 6,600 by July 2009. This therefore supports the view that stock prices should be supported in the immediate future back towards the trend path. Therefore those looking for an immediate crash of the stock market may be disappointed, however any bounce at this point in time would not change the fundamental outlook that we remain in a VERY WEAK STOCKS BEAR MARKET that is increasingly targeting MUCH lower stock prices.

TREND ANALYSIS - Many stock market analysts that have been banking on a rally from January into April have been painfully proved wrong, as the bear market reasserted itself by busting through the November 7449 low on the DJIA. The markets attempts at rallying during late January and early February proved feeble, as correctly anticipated in the original forecast (20th Jan 09). This area of indecision now creates a resistance area for the stock market of between 8400 and 7,900 which is likely to contain any bounce so as to maintain the strongly bearish stock market trend.

PRICE TARGETS - The Dow has breached the 2003 low of 7197 which is bearish and confirms lower prices, longer range support exists at 6,400 and heavy support at 5700. Which implies that there is not much support on the way down to 6,400, a break of which would target a trend to below 6,000 for overshoot to 5,700. On the upside targets as illustrated above are contained by the consolidation area of 7900 to 8400 and therefore projects to a target price point of 7,900 to 8,100.

MACD - The MACD indicator has again turned lower, however it does support the original analysis of a significant low in the making by mid year, in that the February decline has not resulted in a significant breakdown on the MACD indicator which to me strongly suggests that the MACD is heading to make a higher low during mid 2009. I.e. a strongly bullish long-term signal.

SEASONAL TREND - The seasonal tendency is for the stock market to rally into late April / early May. This therefore could support a corrective rally from current levels for the stock indices, i.e. setting the market up for the final push lower into July.

ELLIOTT WAVE THEORY - My interpretation of Elliott wave theory implies that stock market has begun its 5th Major Wave lower of which the current impulse wave lower counts as wave 1, time wise this targets a decline for another 5 months which confirms the original forecast for a July 2009 low. However price wise EW targets much lower prices than the original target of 6,600 therefore there exists a strong probability of the Dow now busting below 6,600, slicing through 6000 enroute to the revised target of 5,700. which would represents a decline of about 23% on the last close. On a longer-term basis this interpretation also implies the bull market that starts in mid 2009 may now prove to be corrective, which will be come much clearer during the second half of 2009.

DJIA Forecast Update Conclusion

The above analysis confirms the bear market trend into mid July 2009. However it is increasingly unlikely that DJIA 6,600 will hold and therefore the bear market is targeting a trend towards a break of the lower target of 6,000. The anticipated trend is as illustrated in the below graph as after possible further immediate term selling is for the DJIA to target a rally to resistance of 7,900 and thereafter resumption of the bear trend to below 6000. However my longer term forecast of a multi-year bull run 'so far' still stands as after the bankrupt financial stocks have reached total wipeout, well there is not much further lower that the markets can be dragged following the July lows as evidenced by the Nasdaq's relative strength due to the fact it contains no financial stocks.

The FTSE is also expected to follow a similar trend with the original forecast as follows now targeting a trend towards the lower target of 3000 rather than the original forecast low of 3,400 as illustrated by the below graph.

Irving Fisher - Debt Deflation Theory

Increasingly analysts are jumping onto the Irving Fisher Economic theory bandwagon as for solutions to the unfolding severe recession and possible depression against the mainstream Keynesian solutions. As I tend to concentrate on the technical picture much more then economic theory I approach both camps from an unbiased point of view, however on digging into history I did uncover the following - Irving Fisher said on 5th September 1929 with the Dow Jones trading at 375, about 4% off its high - "There may be a recession in stock prices, but not anything in the nature of a crash." and again just days before the Great crash began - “Stock prices have reached what looks like a permanently high plateau.”

So analysts need to beware before they hitch their wagons to any economic theories, rather keep ones eyes firmly on the actual price action.

Other Financial Market Forecasts for 2009

These will be updated during the coming two weeks -

By Nadeem Walayat
http://www.marketoracle.co.uk

Copyright © 2005-09 Marketoracle.co.uk (Market Oracle Ltd). All rights reserved.

Nadeem Walayat has over 20 years experience of trading derivatives, portfolio management and analysing the financial markets, including one of few who both anticipated and Beat the 1987 Crash. Nadeem's forward looking analysis specialises on the housing market and interest rates. Nadeem is the Editor of The Market Oracle, a FREE Daily Financial Markets Analysis & Forecasting online publication. We present in-depth analysis from over 250 experienced analysts on a range of views of the probable direction of the financial markets. Thus enabling our readers to arrive at an informed opinion on future market direction. http://www.marketoracle.co.uk

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any trading losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors before engaging in any trading activities.

Attention Editors and Publishers! - You have permission to republish THIS article. Republished articles must include attribution to the author and links back to the http://www.marketoracle.co.uk . Please send an email to republish@marketoracle.co.uk, to include a link to the published article.

Nadeem Walayat Archive

© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Comments

Chris G
02 Mar 09, 10:22
Elliott Wave

Dear Friend,

I find your understanding of EW absolutely facinating.I need to tell you that....

I posted your article from financialsense.com

Dow Jones Stock market Index Forecast 2009 in our forum of trading room (~350 traders, of which ~15 top-profs).

The reaction was explosive!

Now your site is considered as goooood source for elliott wabe analysis!

Please take care of yourself and keep "counting the E-waves"... so as I can post your articles again

Ciao Amico,...& all the best from Aussieland


David Dzidzikashvili
06 Mar 09, 18:23
More bad economic news?

Dow Jones Industrial Average index is at its lowest levels because the investor condence level is at its bottom low. High unemployment and bad economic news also keep the stock market under pressure. I think unfreezing of the credit matkets should have a positive effect on investors, but I don't believe we will have that untill at least 2010. I think we might even see Dow in mid 5Ks or even lower if we don't have more good economic news soon.


Nadeem_Walayat
15 Mar 09, 23:09
Stocks Bottom
See the update of 15th March 2009 for significant update on the bear market bottom and subsuent trend for the Dow and FTSE. http://www.marketoracle.co.uk/Article9435.html

Post Comment

Only logged in users are allowed to post comments. Register/ Log in