Market Updates – The Fork in the Road

 

Index Percentage % Volume
Dow -3.41% down
NASDQ -3.71% down
S&P500 -3.47% down
Russell2000 -3.99% -

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News

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The Stories/News not Covered in Depth Today

  • Long Term Structural Analysis (part 2) The How and Why the imbalance of wealth between the rich and poor in the USA caused the “Great Recession,” and why we need to address this problem.
  • AIG – The mother of all Insurance companies is again near collapse. If the collapse of the much smaller Lehman Brothers sparked the financial crisis and sent 400+ billion dollars of over leveraged debt throughout the world, imagine the collapse of AIG.
  • GE – The mother of all conglomerates is now trading below $10 because of its financial units over leveraged positions. Sure looks like a death spiral similar to auto industry.
  • Banks“How Stressed is Your Bank” from Time magazine. The real problem s not now, but what happens when the bad/toxic debt grows in 2010 and beyond
  • The latest wisdom from Nobel Prize winning Princeton economist Paul Krugman  ”Banking on the Brink” or multi time Pulitzer Prize winner Tom Friedman “Start Up the Risk Takers.”
  • Obama speaks to nation tonight

Today’s editorial is on the technical fork in the road.  Just at the mention of the word technical your eyes may glaze over, but - 

We are at one of those turning points in the history of the US Stock market and perhaps the world.  

See stock section below.

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING!

Stocks

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The Fork in the Road

Who knows why looking at chart patterns usually works as a forecast of future events. Perhaps its because we are creatures of habit or perhaps its because so many analysts simply believe technical analysis works. One item of technical analysis that works better than others is the more time that occurs the more accurate the predictability and significance the pattern becomes.

The benchmark S&P 500 is at one of those critical forks in the road and so are world economies.

1970 to 2009 Chart of the S&P 500 below

(sorry for the overlap)

Here’s the Fork on the benchmark S&P 500 – Notice just like the price peaks in 2000 & 2008 at about 1500+, there are two vallies around 750 in 2002/2003 and today.20002/ 2003 was the result of the tech bubble bursting and the uncertainty behind 911. Today, two economic bubbles have recently burst – housing and credit. The critical support level for the S&P 500 is around 750. Since November the rapid fall of the S&P 500 (as well as the other major US indexes) has leveled off at @750 like in 2003.

The good news – The fact that we’ve held onto 750 since November shows strong support. (note – this chart is a bit distorted but it gives a rough approximation)

The bad news – The rate of decline falling to from 1500 is faster than 2000 to 2003, and yesterday the S&P 500 closed just below 750 at 743. If support at 750 fails we could really see some additional significant stock meltdown.

The Dow has already broken down though its 2002/2003 lows but the NASDQ and Russell 2000 are doing a bit better than our benchmark.

This is the mother of all technical trading pattern battles  


Long Term Outlook BEARS RULE

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See STRATEGY, POSITIONS, OVERVIEW (new) & ARCHIVES sections of blog for more

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING!

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