Market turbulence the past three months has people wondering how much more pain will still occur. The most probable outlook for the next few days (or weeks) is a test of the intraday low on the DJIA (12,455 on 8/16). If that test fails the next likely support level is around 11,900. If that fails, ultimate support should be around 10,575 which is 25% below the recent high.
If there is a succesful test of the 8/16 low, the market will probably rally to year end, reaching somewhere around 14,500 on the DJIA. What is a successful test? The DJIA has an intraday low of 12,455 +/- 300 and then has three consecutive closes after the lowest intraday low above that low.
If the 12,455 test fails, look for another test at 11,900. If the 11.900 test fails, the market will probably fall through year end. The ultimate low for this cycle might not occur until early 2008. If we actually go into a recession, the market might not rally significantly until mid-year or later. In this scenario the best investments will be in ETFs that are short the dollar (long other currencies), some European stocks, especially Russia and eastern Europe and utilities. Other than the above, emerging markets will probably not do well during the early phases of a US recession.