Expert Opinion on Stock Market for 2010

“Profit Confidential” Column, by Michael Lombardi, CFP, MBA and Anthony Jasansky, P. Eng.

If there is someone whose opinion about the stock market I truly respect, it is Anthony Jasansky. He’s been following and analyzing the markets for 28 years as a technical analyst. I believe Anthony is a true market expert.

Here’s Anthony’s well-thought-out 2010 outlook for stocks:

“Santa did show up again this year on Wall Street, and, thanks to him, the majority of North American and Global stocks indices managed to make marginally new 2009 highs.

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The notable exceptions among the major market indices have been the NYSE Composite, the Tokyo Nikkei and the Shanghai Composite. Also failing to make new 2009 highs, were the indices of the two sectors that were at the core of the 2007-2009 meltdown, namely the Financial and the Housing sectors.

The chart of NYSE Composite shows that this most representative index of NYSE common stocks did come quite close to breaking from the consolidation pattern of the last three months.

Among other technical indicators that re-confirmed the current primary uptrend for stocks are the Dow Theory and the rebounding number of stocks making new 52-week highs. On the whole, my group of Technical indicators stands at a very bullish +57% versus -6.0% a month ago. The gain would have been more notable had it not taken place during the light trading of the holidays!

As has been the case, ever since the Federal Reserve took an axe to interest rates, my Fundamental/Monetary group of market indicators remains ‘frozen’ in the bullish zone. Holding the benchmark rate at zero has worked wonders for the financial markets. The downside is that the Fed cannot cut interest rates any lower. Now all they can hope for is that the economy will show a lasting revival before inflationary pressures force interest rate hikes.

The bullish sentiment of advisors and other pros has yet to make any impression on their public targets. Polling by the American Associates of Individual Investors shows that the public remains unconvinced by the bullish chatter — and who can blame them? They had lost heavily when the hi-tech bubble burst only to suffer even larger losses in the real estate crash, 10 years later.

As for my ‘annual guess,’ I will keep it brief. Using the head and shoulder formation on the NYSE Composite, the upside potential for 2010 is 14% above the current price (this bodes well with Michael’s prediction of a Dow Jones Industrial Average over the 11,000 level). However, the strongly bearish decennial pattern for the 10th year of the decade suggests that the market will be down on the year.”

Michael’s Personal Notes:

While I personally shy away from harsh criticism of how world events developed or how they may have been handled in the past  (after all, they become history), I found the following commentary from one of my co-editors, Robert Appel, very thought-provoking and am thus running it for my readers. Robert, a former lawyer, has some very strong opinions. Notice the almost “anger” you can feel in what Robert is saying:

“If there is one prediction I can convey about what we expect in 2010, it is this: 2010 is the year that the charade stops. Or at least slows down.

What charade?

The charade of participatory democracy (sometimes called ‘democratic capitalism,’ a Bush-ism). The charade of international cooperation. The charade that Western governments care more about the people they are supposed to serve than about themselves.

The last 50 years are literally packed with examples of things done in plain sight that nobody ‘noticed.’ They took out John Kennedy in ’63, the only president in 100 years to fight both the Fed and the military-industrial-espionage complex, and no one noticed.

Nixon decoupled from the gold standard in ’71, and no one noticed. (After ’71, the dollar was worth whatever you wanted it to be worth). The U.S. economy was headed for a major crash in 1990 as a result of years of brutal Fed manipulation — saved only by the computer revolution, which temporarily increased efficiencies — and no one noticed.

Both the U.S. and Britain have been spending way beyond their means for years, and no one noticed. (Well, the other Western nations knew, but they were all in the same boat, and kept the secret well). The financial centers of the world now have more power than the governments they are supposed to be regulated by — and no one noticed.

The Western governments have been using public money, your money, to stifle gold for two decades — and no one noticed. The war in Iraq was economic — not moral, not retaliatory — and no one noticed. The 2008 ‘crash’ was manmade, and no one noticed. The U.S. deliberately ignored multiple opportunities to control its loss of manufacturing — and no one noticed.

The Fed is not part of the U.S. government in any way, shape, or form — and no one noticed. The Stimulus was more about avoiding rioting in the streets than a long-term recovery — and no one noticed. (Was the Obama initiative for Gun Control ‘coincidentally coincident’ with the Stimulus?)

I do believe that 2010 will be a little different. People will start to notice things. News will be made. The year 2010 will be one for the history books.”

Where the Market Stands:

I continue to read and hear overwhelmingly about how the economy continues to “suck” and how the stock market has topped out. I read those same reports when the Dow Jones hit 8,000, then 9,000 and then 10,000 in 2009. There is undoubtedly more negative sentiment out there (just see Robert Appel’s comments above) than positive, which actually bodes quite well for the stock market.

The Dow Jones Industrial Average hitting 11,000 will be not a big feat if it happens. Remember, long-term, it’s been a terrible 10-year period for stocks. Remember the NASDAQ when it was at 5,000 in late 1990, early 2000? Well, it never recovered (the NASDAQ is at 2,308 today). Even the S&P 500 is down about 25% from where it traded a decade ago.

While we’ve only had two trading days behind us this year, the Dow Jones starts this fine morning up 1.4% for 2010.

What He Said:

“As a reader, you’re aware I’m not a Greenspan fan. In the years that lie ahead, I believe we (and our children) may pay dearly for the debt bubble Greenspan created during his tenure as head of the U.S. Federal Reserve.” Michael Lombardi in PROFIT CONFIDENTIAL, March 20, 2006. “A low savings rate was eventually blamed for the length of the Great Depression. Consumers just didn’t have enough
money to spend their way of the Depression. With today’s savings rate being so low, a recession could have a profoundly negative effect on overextended consumers.” Michael Lombardi in PROFIT CONFIDENTIAL, March 26, 2006. Michael started talking about and predicting the financial catastrophe we started experiencing in 2008 long before anyone else.