Where will the bottom be? NOT Dow 5000.
I just did Google searches on “Dow 6000,” “Dow 5000,” and “Dow 4000,” and 5000 has about twice as many returns as either of the other two, so that seems to be the most common forecast right now.
The reason contrarian investing works is because the actions of the majority tend to work against their predictions. Presumably, all of the people who believe any one of these forecasts (4000, 5000, 6000) have already made their decision to either (1) cash out now and wait for the bottom, or (2) stay in stocks the whole way and tough out the temporary losses. In other words, these prognosticators won’t be doing any more selling between here and their targets, and therefore won’t be causing any near-term price declines. That means that either the bottom is already here, in which case all of these forecasts are wrong, or that any losses going forward from here will be due to other investors changing their minds, cashing out of stock positions, and creating their own set of bottom forecasts. Eventually, so many people will be cashed out and forecasting further drops that there will be too few sellers left to cause any more price declines. That will mark the bottom of the market, and the rally that follows will leave a huge group of incorrect bearish forecasts in its wake.