Market Updates – Plunge


Index Percentage % Volume
Dow -3.49% up
NASDQ -4.15% up
S&P500 -4.56% up
Russell2000 -4.34% -




Major Plunge on Wall Street

The tug of war over who is going to pay to clean up the huge financial mess became even more apparent yesterday as the major US stock indexes took a nose dive. Wall Street wants anyone else but the bank bondholders, shareholders and executives to pay to clean up the trillions of dollars lost by under regulated financials over leveraged losses. News seemed to indicate that Wall Street would pay more, so stocks tanked.

On the other side is YOU the taxpayers who along with foreign countries are paying to clean up Financials/banks mistakes. (See yesterday’s Investors411 “That Dirty Word – Nationalization”for more). The less compensation/control you are given the better it is for Wall Street.  Since foreign entities are willing to soak up only so much of the debt the old bottom line is whose going to pay for the trillion(s) of financial debt that remains – YOU or Wall Street.

Alan Greenspan, one of the primary architects of the financial crisis, has chimed in with we need more TARP money for “what will surely be the longest and deepest” recession since the  Great Depression.- Greenspan’s answer you and your kids pay. 

Other economists are coming up with alternatives all of which favor one side over the other.  Robert Reich is another noted economist who believes “It would be far cheaper, quicker, and safer for the government to just take over every questionable bank”

Do we keep sending truckloads of your money to prop up major banks while they continue to disguise their losses?  Right now it looks like Geithner and Summers may not be as generous as Paulson in bailing out the financials with your money.

But who knows? Geithner, Summers, Paulson and Greenspan all advocated for the over leveraging policies that created the financial quagmire that has put us in a worldwide recession.

The enormity of the problem is almost overwhelming.  How do you keep Insurance Companies, Manufacturing (cars), Financials, Homeowners, Taxpayers, Wall Street and the Future solvent. Who pays and how much? No matter what you do some group(s) is going to get whacked more than another. 

We will get through this mess, but for months Investors 411 has warned “Problem in financial sector is far far far far far bigger than first imagined. Impact of this mess is going to take years to resolve.” (See positions section of blog)





Short Term Outlook

“Danger Will Robinson Danger Danger” - Yesterday’s Danger signal about the potential for markets to meltdown was, unfortunately, 100% correct. The 4 major indexes took major body blows in increased, above average volume.  Volume, therefore, confirmed the move lower. Fundamentally the fear of nationalization was a huge hunk of the reason Wall Street melted yesterday.

The Dow (see all chart on right hand side of blog) closed at 7551 perilously close to its 7449 multi year low of last November. The benchmark S&P 500 broke through its major support level at @800 and closed at 789. It, like the other major indexes has a ways to go before it reaches its multi year low of 741.

Short Term Outlook

While markets may pause or win back some of yeserday’s losses today, we have already technically confirmed the longer term “Bear’s Rule” chart pattern of lower lows and lower highs. The financial sector (ETF  - FLX) is already at a new multi year low. (click on charts at right hand side of blog)

Momentum is with the bears.

Long Term Outlook Bears Rule

If you look at the 3 year weekly chart of the major indexes we are still just keeping out heads above water because the November lows have not been broken. (scroll down on S&P chart on right  side of blog) However even the weekly chart looks ugly.

(see strategy and positions section of blog for more)


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