Dow Headed Below 10,000?
Remember some of those “literary classics” from a few years ago that predicted new heights for the Dow Jones Industrial Average?:
• Dow 36,000: The New Strategy for Profiting From the Coming Rise in the Stock Market, released November 14, 2000
• Dow 40,000: Strategies for Profiting From the Greatest Bull Market in History, released June 26, 1999
• Dow 100,000: Fact or Fiction, released September 30, 1999
Well, here’s a new forecast that points in the opposite direction. CNBC ran a piece today on how some analysts are saying that the Dow, which closed down 1.5% today to end at 11,215.5, is heading below 10,000. According to CNBC this morning:
Investors should ignore recent signs of strength and face up to the fact that we will face a prolonged bear market, John Carter, president of Trade The Markets, told CNBC Wednesday.
“Longer term we’re looking at a market that is a bear market,” Carter told “Squawk Box Europe.”
While we can expect a rally over the next three to five weeks, this is a downward spiral that is not going away any time soon, he said.
“A trend is a trend until it ends, and we’re actually looking for the Dow to take out 10,000 by the end of the year,” he added.
There are too few sectors holding the markets up, and too many dragging it down, to consider getting back into non-recession-proof sectors, according to Carter.
“A large percentage [of sectors], like financials, are getting hammered. A lot of the darlings of the past are going to get taken out back and get shot,” he said.
“I’m Your Man”
CNBC also spoke to Hugh Hendry, a partner at hedge fund Eclectica Asset Management, who added that technology stocks are also likely to be gunned down as the two were affected by bubble conditions. From the CNBC piece:
Hendry said the outlook is particularly bleak for financial and technology stocks — the two largest components of the S&P 500 — which he said have both seen a bubble.
“When a sector becomes infected by a bubble…what history reveals is it takes 25 years to regain the highs that we saw in real terms,” he said.
Source:
“Dow Will Sink Below 10,000: Strategist”
CNBC, July 2, 2008
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