Analysts Project Higher Market By Year End

Now, nine days later, both the DJIA & S&P 500 are up 12%. Obviously, the bears and sidelined cash decided that if you can’t beat ‘em, join ‘ em. We appreciate the help, but our advice, as we joined the bullish camp back in March, is not to join ‘em at this level but enjoy the ride and wait for a decent, normal pullback before adding to long positions. The risk/reward ratio at these levels looks too dicey.

The main fundamental reason for the recent surge has been much better than projected second quarter earnings, but that game is getting old and should end soon. Momentum remains very positive and of course we respect that. If the market is able to just quickly catch its breadth and continue up, we will join it again. However, at the moment some caution is in order. Our Market Commentary dated July 21 is titled "Happy Days" goes into more detail on this subject.

Another well known economist, Nouriel Roubini added his opinion to Martin Feldstein of Harvard that the global economy may fall back into a recession by late 2010 or 2011 because of rising government debt, high oil prices and a lack of job growth. Although that possibility is a long term off, after its recent big run-up, the market is vulnerable to about anything. And don’t forget all the health care, cap. and trade questions that are already on the table.

We continue to project a higher market by year-end and that the bear market ended March 9. However, it is not unusual, according to our Economist Gary Thayer for double-dip fears to start popping up as a recession ends.

The DJIA closing well over 9,000 and the S&P 500 over initial resistance in the 975-1,000 could attract some sideline cash that has been asleep for four months, but we do not advise chasing stocks here.

Today -- we will be watching to see how much energy the bulls have left.

Written by Chief Market Strategist Al Goldman and Senior Equity Market Strategist Scott Marcouiller.
Source: Wells Fargo