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.
Since I haven't completely embarassed myself by making wrong forecasts, lets continue. Despite doom-sayers talking about a double dip recession and worsening European crisis, the market rallied for more than a month. If you look across markets, there are a few important things to note. First is relative strength of the some Asian stock markets vs the US stock market. The Indonesian stock market is at an all time historic high[Link]. This is a departure from the rally from early last year when the STI was closely correlated with the movements of the DOW. Secondly the US$ has weakened considerably against the Euro and a number of Asian currencies and this favors the risk trade. On Wednesday the DOW had a sharp selloff because the Bernanke said the US economic outlook that is subject to “unusual uncertainty'. Actually this is not true. Many investors are confused too by the sometimes good sometimes bad economic data that comes out. The confusion stems from the fact that the economic indicates are split into various timeframes some are leading indicators, others are lagging indicators and a few like transport related indicators that can be measured in realtime are coincident indicators. When you get various economic indicators sorted out based on the timeframe ...what it tells you with a good degree of certainty is the US economy has been growing but it is slowing with a good chance of a historically rare double dip. The only is uncertainty is what Bernanke himself is going to do to delay what some people say is the 'inevitable'.
I ran the new data through my models since the last update and it tells me that we are on track for a run up to a peak from end Jul to Aug 2010. Not only that because money is flowing into Asia ...and focussed on index stocks tracking the recent purchases - the STI is up even when advance-decline line dips down) the peak (measured by the STI)may exceed the high of this year. However, like I said things don't look too rosy beyond that and this run up is likely to soak up much liquidity and the outlook for the economy doesn't look too good.