[Editor's Note: The following is an "urgent update" from longtime IndexUniverse.com contributor John Serrapere, also known as the Active Indexer. Serrapere is working on a full update to his closely followed research portfolio. Given market turmoil, however, he wanted to publish this latest analysis of where the market stands today.]

Last night, I viewed my charts relative to past periods of extreme and protracted credit stress. This work shows that it is highly probable that S&P 500 companies will earn no better than $67 in 2009, which is 29% higher than current reported earnings near $52.

Historically, P/Es near 12 are the median case. Even using that metric, the S&P 500 will most likely correct down to about 800 ($67*12=804).

In a garden-variety recession, my February 2008 forecast showed support in the 970-1072 range, which provides room for a double bottom (Oct. 1, 2002) in inflation-adjusted terms near 940-960. But the S&P 500 trading at 950 is now viewed as temporary support, with a double bottom being made in nominal terms matching that of October 2002. A case can also be made for a final low near 600. All indicators are pointing to a severe recession lasting many quarters.

We will use rallies to adjust hedges and portfolio exposures. Central banks will print a ton of money to lift credit markets, which eventually will cause higher inflation. They could combat deflation with an extreme monetized boost in money supply, which could stem equity declines in nominal but not in real terms. To avoid being hurt too badly in case they reinflate, we will continue to build 10% positions in EWZ, GAF and MOO at lower prices.

I expect the Central Bankers and G-7 nations to do something big soon.