1. Despite naysayers saying this is a market is 'double topping' (the first top was in the early Feb and we are at the 2nd top and poised for a fall), there is enough liquidity to drive this market higher. In fact, I believe the market will rise and the rate of rise will increase.
2. The market will peak in mid-May 2010 (12 May 2010 as the best estimate) and fall abruptly.
3. It will fall until roughly the 1st week of July 2010 before it attempts to rebound and peak in the last week of Aug 2010. This 2nd peak may or may not be higher than May peak will mark the end of this rally.
This is what the stock market did following my March 2010 forecast:
My first forecast that the market will continue to rise from March turned out to be correct. I identified a peak in 12 May 2010, but it turned out the market peaked on 27 April 2010 which was 2 weeks earlier. After that peak my forecast was for an abrupt drop in the markets which was realised when we saw the biggest drop in May in the past 40 years.
I'm quite surprised that my models were off by 2 weeks for the peak while it was able to forecast the abrupt drop we saw after the peak was formed. I ran everything through with the latest data and this is what I got:
1. The market will recover from the recent abrupt drop from now until end Jul 2010.
2. In end Jul 2010 to Aug 2010, the market will form a 2nd peak that will be close but lower than the 1st peak. You should really get out if here if you miss the 1st chance to end out in end April early May.
My models look at liquidity and things will dry up as govts implement austerity and stimulus spending wears off as we get close to the end of the year. The rise from June to late Jul should materialise as we still have liquidity and we should be able to see another round of good economic numbers from the US (look at the Ceridian Index for May). For medium term moves the market is largely driven by liquidity - the DOW was able to close up even with yesterday's very poor consumer spending numbers. The actual longer term macro-economic picture remains bleak and this combined with diminishing liquidity will suggest an exit from the stock market towards the end of the year - my model puts it at end-Jul.