The Dow closed at exactly 12,800 it will either rebound to 13,100 or down toward 12,500. If no rebound from 12,500 then it could drop between 400 and 500 from there - should stay between 12,000 and 12,800 for about 3 weeks - if it never sees 13,000 during that time it will drop below 12,000 and darkness will prevail until March - If there is no reversal in our economy by spring there will be several crisis's - Housing, commercial real estate, Ford will have to do something - maybe break up - have a truck division and suv's - no cars. There will be a credit contraction including credit card balance disasters. There will be new laws to help - around debt, bankruptcy, etc. Many Hedge funds will go belly up - problems with government pension plans, etc. If all this happens before June (which I doubt) the war will end and our troops will be pulled home. Many corporations will go into default on their debts - retailers going out of business--- with no positive stuff happening the market could settle between 7500 and 8000. Just some thoughts after dinner - probably none of it will happen - things will get lucky - and every story will have a happy ending!
Investors should evaluate their risk exposures and tolerances now, in order to allow for substantial further market weakness. Market conditions presently feature a Pandora's Box of rich valuations, vulnerable profit margins, rising default risk, rapidly deteriorating market internals, failing support levels, and accumulating evidence of oncoming recession. As I noted in my December 17 comment, "there is one particular scenario that would be ominous in my view. That would be if we see a relatively uninterrupted series of declines that breaks cleanly through the August and November lows, followed by a one-day advance of 200-400 Dow points. That's a script that markets tend to follow pre-crash." -
- John Hussman