I'm a little more optimistic than most people. I think we could go back barely below 7K, but no lower than, say, 6800. I think we're starting to turn a corner. For instance, look how the market has responded in the light of bad news the past month. The jobless rates are pathetic and the foreclosure rate is horrible, but the market seems to be responding with resolve to lead the country, and thus, the global economy, out of this mess. I think we're still at least 2 years away from getting anywhere close to where we were in early 2007 before things started trickling south. We'll have setbacks along the road, but I think the market and the overall economy will take 3 steps forward, 2 steps back, but we'll eventually get there. I believe the market is more likely to test 9,000 than it is 6,500.
Theoretically we could test both. The DOW could continue its rally through the summer and test 9000 before it's over with, and then we could see a huge selloff in the fall before making the final bottom late this year. Ideally, January 2010 should be the beginning of a bull run and the economy should begin to grow again. None of these things are a guarantee, and there is a scenario where things get worse and inflation skyrockets.
FYI, we're in a bear market rally right now, so it's expected that the market doesn't always respond the way we think it should. For example, RIMM lowered guidance and estimates a few months ago and then beat those conservative estimates and the stock goes up 20% and more. It doesn't make any sense.
Which one will we see? Who knows, but the big spending and massive deficits, I'm inclined to believe the latter could happen rather than the former. I'd certainly welcome the former, though.