Fleming analyst says Dow set for 2-year bear phase
By Elaine Hardcastle
LONDON, Oct 8 (Reuters) - The U.S. Dow Jones's twelve-year bull run is over and during the next two years the index could drop as much as 38 percent, investment bank Jardine Fleming's technical analyst said on Friday.
''The bull market has run its course and we are in the first corrective wave,' said Naoyuki Fujihara in a note. ''We do not expect the market to be attractive for the next two years.'
Fujihara's analysis of the market since 1929 uses Elliott theory to measure waves in market movements and to predict a turning point in the trend.
His research concludes that the Dow's bull market terminated on 24 August when the index hit 11,365 after a rise of 600 percent since the 1987 post-Black Monday low of 1,616.
The analyst said the market is now in a corrective phase characterised by the emergence of doubters building opposing investment positions. As confidence ebbs, investors increasingly seek quick gains.
Over the last few weeks the U.S. index has been dragged some seven percent from its August 24 peak to stand currently at 10,537.
The market has been hampered by fears of rising interest rates. U.S. policy makers left interest rates on hold on Tuesday but attention switched immediately to employment data due later on Friday and the fear that inflationary pressures would prompt a rate hike in November which could trigger a sharp downturn in share prices.
Fujihara expects the Dow Jones to fall around 15 percent over the next three months, taking the index back to test the 8,914 level.
The analyst said a rebound from oversold levels could cause a brief recovery back to the 10,000 marker but he warns that the downward trend will reassert itself and will last for two years. ''...an additional correction is expected to continue until 2001, with a
gradual fall taking the market down to 6,490,' he said, targeting a 38 percent drop from current levels.
''In the 15-year cycle the market rises for 12-13 years then corrects for two to three years. We expect the bull trend that started in 1987 to terminate this year.'
chris
fyi only...not buying into this arguement...
Still high on IATV...keep watching
NPTN bought in at 20 on Thursday...DSL LONG WAY TO GO and this one has a great double bottom and a low since IPO...check out comparison with COVD |
