S&P500 dropping to 600 by spring 07

[davelj]

The odds of the S&P or Nasdaq’s earnings growing at greater than low single digits this year are not materially greater than zero. And I wouldn’t be at all surprised if they declined this year or next. There’s too much debt on the balance sheets, tech valuations are ridiculous (even if earnings don’t fall), we’re likely headed into a major slowdown if not outright recession, and I bet we see a large divergence between GAAP earnings and “reported operating earnings” (that is, “earnings before bad stuff”) either this year or next, much as we saw in 2000/2001. The only good news is that rates are low and unemployment is low (for now), but that ain’t enough to keep this leaky boat afloat. Right now the market is partying (almost) like it’s 1999. The only reason it isn’t going to fall like in 2000 is that valuations are lower… but they’re still well above what the fundamentals justify. An economic slowdown will have the pleasure of changing all that.

[Chris Scoreboard Johnston]

Chris Johnston

I think based on historical cycles that I study that we are likely to see a decent run up after an early year drop, followed by a strong decline in the late summer. This study is not based on any valuation of individual companies. This rally best guess will start somewhere between March first and May 1st. Who knows how accurate that is due to it being a guess projecting forward. We need a drop or sideways move into that time frame, or the model is off.

The market is currently over valued in comparison to the 30 yr bond, which has been a pretty good predictor historically of price swings. As I mentioned long ago in here, and was made fun of, the ten year cycle with years ending in 7 have had some very nasty late summer drops ( just look through a Dow chart in these years and you will see these declines ). I see no reason why that will not happen this year, however I do think it will be from new highs when it happens.

My two cents worth – As I stated before I am a timer so I need to have a plan. It is adjusted according to conditions at the time of the cycle due dates. I agree with Dave that the market is very overbought here. The other thing that is very troubling, is the excessive amount of bullishness in the advisor community. This typically leads to declines.

On CNBC the other day I heard 4 or 5 Dow year end guesstimates and the lowest one was 14,500! That is way too much bullishness for a major launch to start from. We need to shake the tree a bit first, scare out the weak hands, then a better buy spot will set up. Maybe that late summer drop I forecast, will tie into the recession that alot of people in here are expecting this year. In my business it is not important to try and forecast recessions, so I have no idea if we will get one. It would make sense though based on what I just laid out.

[(former)FormerSanDiegan]

Update …

S&P 500 closed yesterday at ~1423.
How many day’s ’til Spring, PowaySeller ?

[poorgradstudent]

I expect 7-8% growth in the Dow and S&P 500 in 2007, with the Nasdaq lagging a bit behind.
Year end projections:
S&P: 1520
Dow: 13,340

If we get to or near those levels by mid-summer, I’d definitely be concerned about a major drop brewing.

[little lady]

Powayseller doesn’t seem to be posting lately………working on her site maybe?

[sdrealtor]

Probably just needed a break from all of us hooligans. Hopefully, her husband was able to secure a new position as career uncertainties can create enormous stress in a household.

[sdcellar]

Yep, I think we may have run her off (us hooligans, that is). I can only speak for myself, but I enjoy much of what she has to say, so it’d be nice if she were to get back into the mix.

[DaCounselor]

“Yep, I think we may have run her off”
_________________________

You would be laying low too if you spouted off this advice last August:

“One more reason to stay out of the stock market for another year at least. Sorry, no fall rally for the mid-election year cycle folks.”

And it probably doesn’t help that her guru Roubini is now backtracking off of his recession call. What a surprise.

But S&P 600, here we come!

[little lady]

Well she has posted……..and if you read her web site she still contends that it is going to drop, among other things……. http://www.californiahousingforecast.com/commentary/2007/1/20/its-time-to-short-the-stock-market.html

http://www.californiahousingforecast.com/

[(former)FormerSanDiegan]

1301.78

That was the closing price for S&P 500 on the day this thread started. It has climbed about 9% since then. That’s 9% in 5 months (corresponds to over 20% annually). Any 1:1 short would lose 2 years worth of money market returns …. in 5 months. That’s more than San Diego house prices have dropped on a per square foot basis in over a year.
So, being an uber-bear has given on one hand but has taken away in the other.

I wouldn’t be surprised if eventually the market gives back this gain. Maybe even by Spring (I’m not saying what year, though).

But to go to 600 within a couple months ?

I’d bet more on the ground hog’s prediction of winter weather’s duration than on this utterly ridiculous prognostication.

[Chris Scoreboard Johnston]

Chris Johnston

It was and still is an absurd prediction. Let’s let it be and move on. Alarmist and extremist predictions are rarely accurate, but they do get people’s attention through the fear factor. I would hope that nobody in here took that seriously at the time it was prognosticated.

[poorgradstudent]

Extremist predictions are fun to make fun of when they’re very wrong.

This won’t die until Spring ’07 when we know just how wrong it was.

[nla]

S&P500 closes at 1,455.30 today. How many days left till spring?

[woodrow]

Is this the type of brilliant analysis and prognostication we can look forward to on Powayseller’s new website?

I can’t wait to pay for this kind of analysis!

[(former)FormerSanDiegan]

The S&P 500 is UP 11.8% since this thread started.

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