Another nasty week for the stock markets although they did mange to eke out small gains. The S&P 500 was up a meagre 0.4 per cent. But the damage was done as the S&P 500 broke down through its up trend line from the 2004 lows, joining lows seen in 2005 and 2006. We are firmly below the prior year’s lows but not yet below the 2006 lows. The lows this week rebounded off the four-year MA that was briefly penetrated.
The busting of the 2007 lows and the uptrend line that has been in place since 2004 is significant and long-term investors should heed these technical warnings. It tells us that the bull market that began in October 2002 is over. This is not an ordinary correction; we believe it is a resumption of the bear market that began with the highs seen back in January to March 2000. The first part of the bear market was the internet/technology collapse; the second part is the housing and credit collapse.
Make no mistake about it: a credit collapse is the most dangerous collapse of all. Cutting interest rates by 75 bp as the Fed announced this week is a temporary measure and will not turn this mess around. It is solvency that is at issue here, and no amount of low interest rates or stimulus packages are going to cure bankruptcy across the system.
But that said, we may be at a temporary low. We can’t confirm that yet because we have not
taken out any prior week’s high to tell us officially that a near-term correction is under way. We
examined the 2000-02 bear collapse as to drops and corrections in the market. The results are [ read more… ]
The S&P 500 fell for the third week in a row, falling just short of the August lows near 1,370. The spike down on Wednesday took us to 1,378. We managed to close just over 1,400. We are now quite oversold once again so a rebound rally would not be surprising. As well we have the options expiration this coming week, and since they like to cause as many losses as possible the huge put buying seen today is sure to expire worthless.
ajor resistance is seen first at 1,440 then at 1,460. A rally back to 1,460 would be impressive and can’t be ruled out. As an outside, a rally to 1,480 and the flat 100-day and 200-day MAs would be ideal to set up the next collapse. Something like this would quickly bring back huge bullishness as many will declare that the worst is over and a double bottom with August is in.
We doubt that scenario but it will be a reason as to why the market will rally strongly this coming week. If that is to happen, the big up moves will occur into Wednesday and then go flat into the options expiration. [ read more… ]
THE “R” WORD!
This past week it seemed that no matter what I listened to or picked up to read that the “R” word was heard. “R” = “Recession” the word that strikes fear into business leaders, consumers and especially politicians. Of course for the consumer a “recession” is when your neighbour is out of work. When you are out of work it is a “depression”. [ read more… ]
GOLD ON THE MOVE
With Gold now breaking out over $850 it is only a matter of when not if that we will see $1000 Gold and probably higher. We could be moving into the blow off stage for this cycle. Of course it will end in a nasty crash just like all blow offs but for those of you in on the blow off you will enjoy themselves. Gold bugs being what they are probably sat forlornly during the High Tech/Internet blow off in the late 1990’s. [ read more… ]
BUSH IN THE MIDEAST - SO WHAT!
President Bush has been touring the Mid East to accomplish two things. To help bring peace between Israel and Palestine. And to confront and contain Iran. Of course he could have saved himself some time and just stayed home to deal with the sinking US economy. But he is trying to carve himself a legacy that goes beyond his illegal and failed war in Iraq (and we might add Afghanistan as well) and such illegal activities as torture, wiretapping of Americans and so many others we would run out of room. But this trip will be a failure as well. [ read more… ]
