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NYSE WEEKLY COMPOSITE INDEX PREDICTED THRU 2005

by: Dr Stephen A Rinehart

May 2004

Background: Together with another scientist, I developed a computer code over 20+ years ago which could find the major cycles in the long term stock market and I have successfully used the software to trade the NYSE. In particular, the software was useful to define the possible overall broad market moves in the NYSE over several years (using weekly closing data since 1950) for timing your 401(K) moves.

Summary of Results: Since there maybe a network problem with incorporating the graph with this text , I will describe the overall predicted NYSE market moves from the remainder of 2004 thru 2005 (graph attached). The current sell-off in the NYSE is sharp and may continue thru early July 2004. The results still show a possible rally for two to three months in July/August/Sept 2004 followed by a down market starting sometime in Fall (October is usually a bad month in the NYSE) with a final top in late Dec 2004 or early Jan 2005. The NYSE will form a broad top from Jan 2005 thru early to mid- March 2005 (but volatile) followed by a sharply descending market thru the remainder of 2005 (third wave down of a secular Bear Market) with a final bottom possibly not occurring until May 2006!  The fourth and fifth waves down in the coming secular Bear Market may happen from Jan 2008 thru June 2009. The first real bottom in this secular Bear Market is not predicted to occur until June 2009 and the second will occur in Dec 2012!! At this time PEs may have dropped from current 30s to single digits (8 or 9) and stocks could be selling at face value. This will be followed by the largest rally of all time as a huge influx of retirement funds hit the marketplace to buy Chinese/Asian stocks. Remember that Bear Rallies (like we are now seeing) can result in upward moves of 40%+ before the next big drop occurs. It is going to be absolutely wild from March 2005 thru 2015.

Possible Strategy: Get out of 401(K), mutual funds, and stocks by early August 2004 unless you just like playing with fire and taking risks. The top is still predicted to happen in early Jan 2005 for those who like to fish in trouble waters but don’t bet on it. This is going to become a very dangerous global financial market in 2005/2006. The bond market may collapse in price if interest rates go sharply up and REITS (Real Estate Investment Trusts) are already taking a beating. Cash will be King but there are immediate buying opportunities in getting a few 1 oz gold coins called American Eagles or Canadian Maple Leafs (buy slowly over time (months) – not all at once because gold prices are very volatile) and save them in safety deposit box for the time being.