Projections for 2010

As much as I wish there was a system that we could turn the crank and make lots of money on the markets, I think the market is too good for that to work.  We are reduced to educated guesswork.  Some guesses:

  • The S&P 500 will move from its astonishing trendline to a slightly down trending sideways market for 6 months before it starts moving up in a sustained fashion.  I project the SPY low will be at around 100, 10% off recent highs. The chart below indicates we have already moved off of the trendline. This guess is based on what happened in somewhat similar situations in 1999 and 2004 (big uptrends after significant bottoms).  Click on graph to enlarge.

12 year look at SPY

  • The VIX index will continue its downward trend, but the rate of decay will slow.   Lows around 16 by the end of 2010.
  • Interest rates  will increase.   This prediction seems like a no-brainer, but as usual the timing is the trick.    It seems that there is very little risk that interest rates will go down this year.  We should be able to make money on that.
  • The price of oil will continue to go up.   Reviving economies will consume more oil, and the oil producers will be happy to let that happen. But don’t expect another bubble–it takes people longer than a year to forget the bubble collapse in any given asset.
  • Manufacturing will continue to lead us out of this recession.  Real estate, especially high end residential and commercial will not get healthy this year.   Job-less recovery and real-estate hang-over will keep consumers from helping much until the 2nd half of the year.

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