Why the US Markets will go....Up or Down

Two sides to every story (at least two sides), these articles both appeared the same day from two analysts at different investment firms.

This past week was a difficult period for market optimists. As we approached the Memorial Weekend, the Dow had fallen by around 500 Points and the jobless figures were the only highlight of an otherwise gloomy week. Here are the reasons to expect the market to continue to drift lower over the coming weeks,

1. The FED will only cut rates further if an absolute disaster hits the market, such as a Bank or Monoline folding.
The FED economic outlook has been downgraded (again) with growth in the range of 0.3%to 1.2%.
2. Housing inventories are rising, now over 11 months.
3. Oil prices are expected to rise. (To somewhere between $160 and $200 per Barrel.)
4. Retailers are continuing to retrench from planned expansion, others are closing stores, and the worst affected face chapter 11.
5. The long awaited Commercial Real Estate Value depreciation appears to have started. (Two months of negative growth.)
6. Financials are still undercapitalized to deal with Alt-A, Etc.
7. The CPI Inflation figure, is a bad joke. (It has been underrated for years.)
8. Bearing in mind the CPI figure, it is likely that with a proper inflation estimate, the US economy is already in recession, as growth assumptions are also affected.

The only sectors that appear to be rising are Commodities, such as Oil and Metals. During this coming year it will be extremely difficult for corporations to pass on the full inflation costs to their customers, so margins will tighten considerably. Therefore, if margins drop by 33%, the P/E figure will rise by 50%. This indicates the current market values are overvalued by a considerable margin.

I expect the Dow to continue to drift lower, shedding between 10% and 20% of its current value, over the coming 15 months.

And then this;

Ten reasons to expect higher rally highs

10. Seasonal factors are constructive. Over the past 10 years the July-September period has had a bearish bias, but May-August has had a bullish bias.
9. The market is awash in liquidity. A "money mountain."
8. The patterns for most global markets are similar to that for one day gains in excess of 3% have signaled a long term rally.
7. In the past, 90% up days, combined with one day gains in excess of 3% have signaled a long term rally as occured earlier this year.
6. The number of NYSE stocks making 52-week highs has been expanding and confirmed the May recovery highs.
5. Common stock breadth is broadly positive and confirmed the May rally highs. Over 80% of the current S&P 500 components have gained ground since March.
4. Consolidated tape volume is confirming th erally off th emarch low.
3. Sentiment indicators are still neutral to oversold - euphoria does not exist.
2. Medium term momentum for the major indexes and for all 10 S&P sectors is still contructive.
1. Leadership (transportation, energy, materials) confirmed by hitting all time highs. The uptrends in both the DJ Industrials and the DJ Transports signaled a Dow Theory bull market, suggesting that the primary trend is up.

It usually does go up or down or sideways...