So Where could the Market Go?I received a text yesterday from a friend who asked my opinion on where I thought the market could go. My response was that I could see 20000 on the DJIA and perhaps if it got down down into the hundred year channel - 15000.<br /> <br /> So where do I get such numbers??<br /> <br /> There is a long term relationship between interest rates and the market P/E ratio. It is essentially reverse relationship meaning the higher the interest rate the lower the market P/E ratio.<br /> <br /> I don't see inflation over the next six months or so going below 6%, especially since OPEC is cutting production in an effort to increase oil prices. As Obscure says, oil is the world's currency.<br /> <br /> Hisrtorically, when the Fed doesn't act soon enough to raise interest rates, the Fed rate goes above the inflation rate for a while until things cool down through a recession. So we take the 6% inflation number, we would get a market P/E ratio of in and around13 compared to the current number of 18.5. Such a relationship would generate a DOW of 20000.