October 17, 2009 – U.S. stock prices added to the gains of recent days. Equities had declined for most of the day, after the Federal Reserve announced an industrial output level that was less than expected by investors.

The Federal Reserve said industrial production increased 0.1 percent in October. A rise of 0.4 percent had been the median estimate of economists polled by Bloomberg News. Manufacturing accounts for about 12 percent of the U.S. economy.

The Standard and Poor 500 index rose 0.1 percent to 1,110.32, its highest close since Oct. 2, 2008. The Dow Jones Industrial Average gained 30.46 points, or 0.3 percent, to 10,437.42, also a 13-month high.

“Even though the market rallied on the close, we still think it is going to fall,” said Allen Reminick, president of Blue Apple Trends. “We were not surprised when the economy showed less strength than expected, because our model projects weakness into the second quarter of 2010.”

“The methodology of Blue Apple Trends has for some months been predicting a top in the Dow Jones of about 11,000, by March 2010,” said Reminick. “A slide in equity prices could start at any time, and should be accompanied by weakening economic indicators.”

There could be an intermediate-term rebound in the stock market in the second half of 2010, including also an improvement in the economy, said Reminick.

“But in 2011 and 2012, we expect poor performance for the economy and stocks, with the Dow to dropping to 5000,” said Reminick.

Blue Apple’s Trendsetter 2 model has been accurately forecasting trends in the stock market since 1966. Reminick’s market research expands the traditional technical approach to include cycle analysis. The approach incorporates non-sinusoidal waves, instead of relying exclusively on the sine-wave or Fourier decomposition approach, said Reminick.

--Laure Edwards