Baseline Expectations - 02/02/10

Markets will have a limited memory from day to day this year. The U.S. stock market will show little movement during the first quarter. For the full year, the major market indices will likely exhibit a high-single-digit loss (down 5% to 10%).

Late last week, there appeared to be far too much near-term negativity developing by Friday's end. I closed out a number of short-term trading shorts and added to my long rentals (which I sold into strength on Monday), in part, due to the deep oversold exhibited in The Divine Ms. M.'s opening missive today.

My short-term conclusion remains that we have not entered a sharp downtrend nor will equities rebound much in the weeks ahead.

We are now four and a half weeks into the new year, and the course of the markets in 2010 continues to develop as anticipated.

A tug of war between the statistical economic recovery and the headwinds (and due bills) of a host of nontraditional factors will likely remain in force, producing a trendless and, at times, frustrating market.

Here are my baseline expectations:

• Markets will have a limited memory from day to day this year, frustrating for long-term investors but a great backdrop for opportunistic traders who are willing to buy the dips and sell the rips.

 

• I continue to believe that the U.S. stock market will show little movement during the first quarter.

 

• For the full year, the major market indices will likely exhibit a high-single-digit loss (down 5% to 10%).