[Wyatt's Torch]

But in any case, it looks to me like if you extend the best-fit line of this graph, it indicates we should be around 10,000.

Ahhhh, if only markets followed regression lines. I read your prediction. I made one too in the middle of June that the DJIA would drop to 7,500, NASD to 1,200, and S&P to 800 then we would hit a trading range for a year or so. Your volatility theory looks good now. I just want to know what, fundamentally, would be the reason for the markets to increase 21% in the next 3 months? What changed since last week (other than a resurgence in the dollar and a collapse in gold - both of which are signs of resumed deflation).

[mrs9x]

DOW is up over 300 as of 10:35 this morning...maybe we can move up over 500 points again!

[Dales]

The basis for me thinking there was an overcorrection was that the earnings yields for equities were lower than that of government bonds.

The guess (and it was just that, and I am not claiming otherwise) about where it would end up by November was a gut feel based on my belief that the influx of people "new" to the market is leading to a more emotion-based wave than has been prevelant in the past.

And 10,000 seemed a better guess when I made it because the market was not down nearly as low as it would get when I made that prediction. Caveat lector :-)

[Dales]

What changed since last week

My theory is...the mood. It didn't used to matter as much as it does now.

I actually hope I am wrong. The implications of a market that is so tied into sentiment are chilling, frankly.

[LS]

Wyatt, you ask "what has changed since last week?" Are you kidding? The world.

1) Merely the THREAT of new government "crackdowns" has caused Coke, the Wash Post, and others to change their future accounting practices.

2) That same threat has caused numerous companies, including Qwest, today, to announce that it was re-stating its "earnings reports" to include the kinds of options that should have been on there before. But clearly these companies think that, for whatever reason, getting it out in the open is better business than concealing it further.

3) The market overcorrected (as you know, IMHO, badly).

4) The economy. Productivity---remember that one? It is real, it is up, and the market knows it.

5) The scandals only ever had a limited news shelf life. This is not the Great Depression, and the kidnappings and trapped miners were, well, much better stories.

6) Robert Rubin, Robert Rubin, Robert Rubin. He was so tied to ENRON that the media has had to back off; and as it did, the markets come back due to better percpetions.

I think there are also other reasons, but this will do.