U.S. stocks are in a bear market that may last until 2018 and benchmark indexes may set new lows, said Alan R. Shaw, the technical analyst who retired from Citigroup Inc. after 45 years with the bank and its predecessors.

"I don't think the bear market that started in 2000 has run its course yet," Shaw said in an interview in New York. In the last report he authored for Citigroup (C) in 2004, Shaw said the Dow Jones Industrial Average might struggle to remain above 10,000 for up to 20 years, "and I see no reason to change it five years later. My mindset continues to be very cautious."

Shaw's forecast was based on how long it took the Dow average to sustain advances above the 100 level from 1902 to 1927, and its struggle to exceed 1,000 from 1960 to 1985.

"It's too early for another big bull market, period," said Shaw, who from 1993 through 1999 was the top-ranked technical analyst in Institutional Investor magazine's annual poll. Technical analysts base predictions on price and volume chart patterns.

Stock benchmarks are likely to fall below this year's lows before the bear market is over, Shaw said. The prediction is at odds with the forecasts of Wall Street strategists. Eight strategists surveyed by Bloomberg News on average estimate the Standard & Poor's 500 Index will end next year at 1,226, up 11 percent from its close today at 1,102.35.

Dow's Struggle The 113-year-old Dow average closed above 10,000 for the first time on March 29, 1999. The 30-stock gauge peaked at 11,722.98 in January 2000 before plunging 38 percent by October 2002 as the so-called technology bubble ended.

The Dow exceeded 10,000 again in December 2003 before falling below five months later. If fluctuated around 10,000 before surpassing it in October 2004 on its way to a record 14,164.53 in October 2007, from which it plunged 54 percent in the worst bear market since the Great Depression. The measure closed at 10,405.83 today, having rebounded from 6,547.05 in March.

Shaw said he's alarmed by the slowing pace of the market's rebound from a 12-year low nine months ago, and by low levels of investor pessimism.

Rebounds of at least 60 percent by the Dow average and the S&P 500 have driven pessimism on U.S. stocks to the lowest level in six years, as measured by the weekly Investors Intelligence survey. In the poll of about 140 newsletter writers, 16.5 percent were bearish last week, the fewest since June 2003.

'Hollow Feeling' "We're in a market in transition," Shaw said. "If you see it, the trained eye does, each high is a little higher, but there's no follow-through. It gives you that hollow feeling."

Shaw's prediction of an 18-year bear market contracts with the average length of past plunges. Bear markets, defined as declines of at least 20 percent, have averaged 15 months since 1962, according to Birinyi Associates Inc. in Westport, Connecticut. The eight declines in the S&P 500 of at least that magnitude averaged 37 percent and the longest bear market, from March 2000 to October 2002, lasted 31 months.

Aside from municipal bonds, Shaw said he's currently investing only in gold stocks, expecting bullion to rise to at least $2,000, perhaps $3,000, an ounce, from $1,120.90 in New York yesterday. The precious metal is heading for its ninth straight annual advance.

Inflation Concern "Gold will benefit from deflation or inflation, certainly the latter," he said. "The way deficit spending is going at this stage I don't see how we can escape inflation."

The record $1.4 trillion federal deficit for the fiscal year that ended Sept. 30 represented 10 percent of the economy. The deficit widened in the past year because of falling tax revenue, bailouts of the banking and auto industries, and a $787 billion economic-stimulus measure to revive the economy from the worst recession in seven decades.

At home on New York's Shelter Island, where he lives with his wife, Shaw, 71, said he spends most of his time reading market research and monitoring his portfolio, the stocks in the Dow average and the major market averages.

Photographic Memory He said a photographic memory allows him to recall the level at which the Dow average bottomed in 1966, the street address in Washington where he met the brokerage manager who steered him into his first job on Wall Street, and the date he received his first paycheck.

Citigroup's decision to eliminate its technical analysis department in 2005 still rankles Shaw, though it saved him money. From a peak of $56.41 in 2006, Citigroup shares fell as much as 98 percent to a low of $1.02 in March on the New York Stock Exchange after the U.S. government took a stake in the company to ensure its survival.

Shaw sold some of his shares in what was then the world's biggest bank at prices between $50 and $55 after retiring in 2004, he said, and the rest at around $45 on the day Citigroup fired the technical analysts from its Smith Barney brokerage.

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