So what seems likely to happen in 2012? This is what I predicted back in June 2011.

So what seems likely to happen in 2012? This is what I predicted back in June 2011.

Then there will be one more panic in 2011 back to 11,950 and end then, as predicted before at around 12,700 on December 31, 2011.

Then in January 2012, the market will “test out new highs”. That would mean that it will break through the 12,700 barrier and run up into the 13,000s. After exploring the 13,000s for a while, it will discover a new psychological “top”.

That could be as low as 13,100 or as high as 13,500. But the economic recovery will still not be on track yet nor very strong. So I predict 13,450 maximum. We have to remember another important factor here: the 2012 presidential elections.

Incumbent presidents always want things to SEEM LIKE THEY ARE GETTING BETTER just at the time they come up for re-election. And it does not matter how bad it has been: people lose perspective. So as long as things are improving, they stand the best chance of being re-elected for another term in office.

Since presidential advisers all know this behavioral pattern, they know they must obey it. It gives them an incentive to “dump” all the bad news they have into the markets during their first few years, so that things will be improving come re-election time. I think that may explain a lot of the situation we see now.

The executive office (president) will start “priming things up” very soon, and we will see what they call a real economic recovery begin to form. It will not be anything really dramatic, but it will be just enough to get Obama and his group re-elected.

Prediction: Obama re-elected in 2012 with 50.4 % of the popular vote. The Republican candidate will get 46.7 % of the popular vote. Obama will get 74 % of the electoral vote and most of the same states as he won in 2008.

Ohio is a “toss-up”. Obama has visited there 13 times already. He is campaigning hard for Ohio. It has high unemployment, a large population and is a “swing state”. It could go either way. Obama will win it given a “decent” economic recovery. He will lose it if the economy falls off track.