Markets trading range UP,DOWN or FLAT ????

Markets are trying to figure out the uncertainty which has been created by sub-prime mess....

Markets till this day since august has NOT figured out what is the "ultimate cost of this mess"

Markets are also trying to figure out...what will be the worldwide impact of the credit/housing mess........

Worldwide economies will be impacted due to US slowdown.......the debate & uncertainty of "how much" is what troubling markets worldwide......

Markets "hates uncertainty"......and there is "plenty of uncertainty to go around"

The big question is :

-Is US going to go into recession......if the answer is yes then the next question is for how long....

-Then the related issue is IF US goes into recession...then how much it will impact China,India,Brazil,Russia & Europe........

So far......Markets is saying that US will go into recession & there will be an impact on rest of the world economies.......

So let us deal with this conclusion........

S&P 500 went DOWN to 1270...with this FEAR.......

What happens to S&P 500 if the fear of recession becomes REALITY......

S&P 500 can easily go to 1100.......a further drop of 13.3% from recent LOW ????

So...now deal with the issue of HOW we can avoid "recession"

Recession can be avoided if fed cuts another 50 basis on wed.....plus we approve economic stimulus package & check is IN the mail by May.........

So....if the check is in the mail in May...then the economic impact will be in June......

All the economic reports which covers the period of June will report in July that economy is improving........

Once we report improvement in July...then confidence in US economy & its impact worldwide will be evident.......

Markets will then start reflecting the increased confidence in economy worldwide from Aug onwards........

So my thesis clearly takes us to july period as the "first evidence of improving economy"

So...what does the markets DO from Jan 28th to July 31st ....a long SIX months lag time?????

This is a several trillions $ question.........?????

This is how I see IT...... a guesswork only...I hope !!!!

S&P 500 will be range bound...with a DOWNSIDE potential to 1200 & UPSIDE to 1450 area ????

S&P 500 closed friday @ 1330.61...........

So we have a trading range of 250 S&P 500 points area......

Based on friday close.....we have an upside target of another possible 119 points on S&P 500......

In other words Dow upside target is somewhere 13,300 area......

So...we are dealing with a potential Upside market gain of another 9% area from here.......

Once we hit S&P 500 to 1450 area........a MAJOR pullback will set in ??????

Why do I think that we have a potential 9% more on the UPSIDE first ?????/

Because Fed & White house will do their best to avoid recession.........

Whether that effort will give US the desired result ?????

Only TIME will tell !!!!!!

We are also entering slower economic growth time in US between now & July......

From Q3 US economy is stronger with Q4 being the strongest.......

So after initial "euphoria of fed cuts & stimulus package".........

Markets will remain range bound till july........

Range of markets will be dictated by economic reports from here till July........

So...until uncertainty remains about economy....

Markets hates uncertainty.......

So markets will remain "jittery"..until there is CLARITY about economy....

So...how one invest/trade in this type of market.......

Homework & knowing your stocks extremely well will be the deciding factor...70% FA & 30% TA plus tape monitoring will rule.......

Lot of strong stocks are on "fire sale".....so should be bought here & accumulated for both long term & short term trades........

Markets will be "extremely volatile"...so take advantage of volatility.....

Good luck on dealing with current UNCERTAIN times in the markets.......

Please understand & KNOW the downside of every stock you buy....so you have very HIGH comfort level with your exposure.......

BLOG does NOT give buy or sell.

Saleem