The more I read about the US market, the more scary it gets.

The scary part is the US FED interventions to bail out the "dead banks" at all costs will only extend and amplify the ongoing recession/depression.

http://seekingalpha.com/article/1152...from-the-1930s

The true S&P 500 FY09 earnings is projected to be around $40 this year.

http://www.bestwaytoinvest.com/stori...return-markets

The 1932 Bear market bottomed out at around 6 times earnings.
I think the 1973-74-82 bear market bottomed out at around 7 to 8 times earnings.
Other major bear markets have also bottomed out in the vicinity of 10 times earnings.

Given this scenario, where exactly is the bottom for the S&P 500?

If this bear market is a repeat of 1929-32 depression era, then the S&P 500 should bottom out at around 240 (i.e., 6 x $40 = 240).

If this bear market is a repeat of the 1973-74 bear market, then the S&P 500 should bottom out at around 320 (i.e., 8 x $40 = 320)

If we are a bit lucky and bottom out like other major bear markets, then the S&P 500 should bottom out at around 400 (i.e., 10 x $40 = 400)

Even with a very optimistic bottoming out at a 15 PE, the S&P 500 should bottom out at around 600 (i.e., 15 x $40 = 600)

Today, the S&P 500 trades at 850.

If the S&P 500 were to trade at 240, then a 72% decline is still pending.
If the S&P 500 were to trade at 320, then a 62% decline is still pending.
If the S&P 500 were to trade at 400, then a 53% decline is still pending.
If the S&P 500 were to trade at 600, then a 30% decline is still pending.

Personally, I think the buck stops at 600 levels for the S&P 500. But even at 600, the decline is an alarming 30% from current levels.

Where is the real bottom for the US ?

Finally, how exactly would this "Nightmare on Wall Street" impact the SENSEX and the NIFTY going forward ? How should I position myself when this onslaught occurs ?

PS. By the way, Bennett Sedacca, moved from 100% cash to equities on Thursday (1/15) citing that the S&P 500 low of 741 will hold for now.

Firstly, I agree only partially with the first statement.

The bailouts will surely extend the recession/depression.

However, I don't agree that the bailouts will amplify the recession/depression.

If the government would have allowed the banks to fail, US would have been in a depression for sure.

That is what the government did in the 1930's.

There were no bailouts, no liquidity injection, no nothing.

and the result....the whole banking system collapsed.

It was the fear of such a systemic failure that lead to the October stock market sell-off.

I am no fan of the Bush administration, but I strongly feel that it did the right thing by bailing out the banks.

(At the same time, I also hold the Bush administration responsible for bringing the economy to a state of near-collapse).

==============================

The bottom for the US markets is difficult to predict.

After the Japanese asset bubble burst in 1990, the Nikkei 225 never made a new high and isn't going to make a new high in next 10 years.

In fact, the Nikkei 225 made a 26-year low in October 2008.

The gravity of US's economic problems makes me think that US may not see a new bull-run for a long time. (There may intermediate bullish up-moves).

==============================

As far as Indian markets are concerned, I feel all sell-offs should be used to go long.

As long as there is growth in the economy and there is inflation, earnings of companies will grow in the long-term.

Sooner or later, a new bull market has to start in India.

When will Indian markets start a fresh bull-run?

I wish I has an answer....

__________________
Read All Rules Before Making Any Post | E-Investing on Google+

This is a long term Dow Jones chart posted in other post from my end

Dow jones is currently at 8000 levels . We are sooner or later going to test the long term trendline in chart near 4000 levels!

There are 2 things either price goes down and meet the trendline or Trendline rise & meet the price over number of years!

So lets see who gets there first!

If you compare this with S&P which is at 800 levels, we will hit 400 on same sooner or later!
These S&P support levels which you have shown are based on S&P data which is much younger than Dow jones! and doesn't have much weight!. You should more make a parallel from Dow as it trades from 1930 Era!

I need to understand this Technical Chart, It will not take more than 15 mins to understand. If any one can give his cell no.

Would be great favour.

@Man4urheart

Plz can u do the same Technical Analysis for NIFTY/Sensex n tell where is it heading.