2008 Befuddled the Experts

01/08/2009 10:08 am EST

Focus: MARKETS

Dan Sullivan

Editor, The Chartist

Dan Sullivan, editor of The Chartist, says last year was off the charts in so many ways, and he maintains a negative outlook for 2009.

2008 turned out to be one of the most difficult investment environments for stock investors in US history.

This has also been one of the few times I can remember that not only has the stock market been under extreme pressure the real estate market has also plummeted in tandem. It has been a double whammy on the net worth of almost any kind of investor around the globe. Trillions of dollars have been lost by all kinds of people from the super rich billionaires to the average hardworking person. This has certainly been an unusual time and it does not appear that the end is in sight over the near term.

To illustrate how volatile the market has been this year, since 1900, the Dow Jones Industrial Average had seven out of ten biggest one-day point gains in 2008! Two out of the ten biggest percentage gains also took place in 2008—on October 13, 2008 and October 28, 2008, where the gains were [both around 11%].

Also in 2008, the Dow had 14 out of 20 of the worst daily point losses, all occurring between September and December. Five of those daily point losses happened just in November alone. On a percentage basis, though, only three out of the 20 worst losses occurred in 2008. Most of the major percentage losses occurred between 1929 and 1933. The Dow is on track to record one of its worst one year percentage declines in its history.

We have been asked what our prediction is for the stock market for 2009. [This year is] the 40th year since our first publication in 1969, and I have always tried to dodge this question as best as I can. In reality, nobody knows what is in store for investors for 2009. Look at all the unpredictable and extraordinary events that have taken place this year that no one saw coming!

As a matter of fact, several of Wall Street’s top analysts were asked last year to make predictions where they thought the Standard & Poor’s 500 index would finish in 2008, and not one of them even came close. The range they predicted for the S&P 500 on the low side was 1525 and the highest prediction was 1750. The S&P 500 is currently trading around 900.

Trying to predict the markets is a very hazardous undertaking and that is why we follow our indicators on a day-to-day basis, as they are based on the price action of the market itself and the price action of individual stocks. As you know, our indicators have been negative for the last 11 months and continue in the same mode.

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