Bankruptcy, Debt Collapse, The Credit Crunch
BANKRUPTCY, DEBT COLLAPSE, THE CREDIT CRUNCH, and CARLYLE CORP. ECONOMIC INDICATORS
The crisis gripping America is the worst since the Great Depression. We are witnessing the unraveling of debt at an unprecedented pace. Trillions of dollars – not billions, but trillions – are at risk. That only a small portion of this debt has been acknowledged is not surprising, because if the monetary authorities, the bankers, the corporations and the talking heads on CNBC and BNN actually came out and acknowledged the fact, there would be a financial panic of unprecedented proportions. So instead of one great big financial gulp, this will take many years to work out and the stock market will unfold in waves both up and down.
An article in the March 1 issue of The Economist entitled “Searching for Plan B” notes how repossessions are up 90 per cent from a year ago, that house prices according to Case-Schiller fell nine per cent in 2007 (and we note that in areas such as Florida, Arizona, California and Nevada it is closer to 25 per cent), and that the pace of the decline is accelerating. They note that 8.8 million mortgage holders, or 17 per cent of the total, have home loans greater than the value of their homes. If prices were to fall another 10 per cent, that would rise to 14 million homeowners,or 27 per cent. [read more…]
S&P 500 STRATEGY: STAND ASIDE (for definitions of terms see end of report)
Our 5th wave down is underway. We have no doubt about that now as we made a new low close for the move down and we are very near to seeing new intra-day lows. The odds say these lows will be taken out. The Dow Jones Industrials also made a new low close (under 12,000, for the first time since October 2006). We also closed below the intra-day high of January 14, 2000 so we are now back into the topping zone of early 2000. This is not a good sign.
With what we believe was the 4th wave completing with the lower high of February 27, we now focus on where this move or 5th wave could take us. First we need confirmation with a break of the intraday lows near 1,270 (Friday’s low was 1,282). Minimum target appears to be 1,140, which is the top and bottom of zones seen back in 2004 and 2005. We noted before that we thought we should see at least 1,200. The DJI has targets down at 11,300 and could have targets down as low as 10,250. Both the S&P 500 and the DJI are clinging just above their four-year MAs; we note below that the NASDAQ did break and close under its four-year MA and also made new lows for the move down.
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TSX INDICES
The TSX Composite fell 2.39% this past week signaling to us that the down trend may be resuming. We failed right at resistance of the 40 week MA and this week we broke back down under the 13 week MA. Four sub indices posted new lows including Information Technology, the Consumers – Staples and Discretionary as well Health Care. We see little signs that the market should be bought.
The Energy Index has failed once again to break through the huge two year trading/triangular pattern and that remains a concern particularly since this week left a possible small topping pattern on the charts. Means we could pull back once again. Golds and Materials, the latter who made new highs, also left bearish candlesticks on the charts opening higher and closing lower. Both were down on the week. So they may be signaling at least another pause.
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