The market has been hitting highs again and again.  Now it seems that everyone is happy and cheery now.  I think the worst is definitely behind us because we’re not going to see the type of financial collapses that we saw last year and we all expect unemployed to keep sinking.  So the downside is a bit limited since money still coming off the sidelines and there’s a lot of it.  So I don’t expect another major drop like the 1930s because 20% unemployment is probably the only thing that will push the market down and at this point, it’s highly unlikely unless there is some natural catastrophe or major epidemic or god forbid another major terrorist attack.

I’m seeing something more a smaller retracement led by the leaders of the rally which are techs and commodities.  As the dollar trade pushes back a bit, we’ll probably see commodities pull back a bit.  Perhaps oil to the low $60s and techs just retracing back some gains.  It looks like at this point the pull back for the S&P would be to around 1000 so that’s 6% and I see that for the Nasdaq as well.  So we’ll see.  I think it’ll be a slow and strange six percent.

The key to this historic rally is based on real estate and we’ll see if all that shadow inventory of real estate comes out as a drip or a river.  If it’s a river, we’re dead.  If it drips, we’ll be ok.  But one thing I am going to look out for in the future is probably real estate maybe going up like crazy in certain areas.  Not because of Americans buying real estate but because of foreigners.  When rates start moving up with inflation, US borrowers will face higher rates so they can afford less but those crazy foreigners will pay cash as prices will stay down because rates are so high.  And before you know it, you’ll have a lot more Chinese and Indian neighbors.

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