Market Outlook for 2011

I was struck by this Chart of the Day:

The S&P 500 has tracked in direction and time what occurred since the crash in 1929. That points to a bottom in the market near 2012.

I’m concerned about debt in this country and around the world, the trouble in Euro-land, the slowdown in China brought on by their inflation and mis-allocation of resources (whole cities are sitting empty). I think the banks here are choked with commercial real estate that needs to be written down, housing may suffer another 20% pullback and cities and states have a long way to go before they are on sound fiscal footing. Unemployment is likely to stay high and even given a push higher by laying off of government employees. In addition, the likelihood for violence when unions are confronted by cuts in pay and pensions could rival what we’ve seen in Europe.

The government has spent $2 Trillion fighting this recession in 2010 and still we can look forward to more spending even though our debt is likely to hit 100% of GDP in 2011. And what has it bought us? Commodity prices are reflecting uncertainty, fear of shortages and fear of a declining dollar. How can the stock market continue higher? In my opinion it can’t!

My opinion on the markets in 2011?

I think we are looking for the DJIA to test the lows of 9600 to 9800! (see chart)

Tags: Predictions for 2011

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