IMO, Not making a prediction, not trying to pick a bottom, just giving my perspective of what I see on the chart, not fundamentally. Could it be a double top? Maybe. Could it be a double bottom base? Maybe. Perhaps it is consolidation on a long term chart, a pause before another bull run of Harry S. Dent proportions. I'm looking at it as a test of support and I'll wait for confirmation or failure of that support.
What I find different about this downturn as opposed to any other in the life of this current bull market is: Fundamentals: 1: There has never been an earnings reporting period with so many misses and disappointing guidance going forward. 2: Oil has never approached this level before. 3: Sub Prime problems won't end until the last of these Sub Prime notes expire. That's approximately 2010. There is such an accumulation of big fundamental problems its overwhelming. Technicals: If you look at the attached 10 year chart of the S&P500, you will notice that the rising 20 month moving average has contained (on a closing monthly candle basis) every pullback of this current bull market since 2003. But, every quarter of this current bull market has had good earning and future expectations, so there was a reason for a bounce. This is the first time I don't a reason for a bounce off the 20 month moving average to new highs. However, we will more than likely get a technical bounce, but not to new highs.
I watch the advance decline numbers every day and there have been 4 or 5 massive down days in this decline with over 2000 net declines. You just don't see that very often. So, yes, this correction is different than the other ones on the past couple of years. Of course, if the market were to post a few massive up days in terms of breadth then I would switch my position. But this market isn't done on the downside until some of these banks post 50% declines in a single day( from 6 to 3) or something similar. The sentiment has to be much worse. This happened in 1990 with collapses in the bank stocks and the D word was mentioned on Wall Street Week a couple of times. Lower still yet in my opinion.
I will disclose that I have been short for several weeks. The current angle of descent is too steep in my humble opinion. Expect a rally, sell into it and/or go short as we are headed lower. Cheers!
Are things that bad out there? Wall Street raises had a banner year, unemploynent is very LOW. The lower dollars is helping many company's like Tech. I understand the subprime market is bad. Do you not expect the hang sang to correct? Of course I do stocks were going from 1 dollar 50 in a week. Are you cutting back on spending this year? I'm not. I dont really know anyone who is. I do have one very big problem, that is these BANKS not being truthful. That does concern me alot. The media is riding this correction like Seattle slew. I have so much private work coming in latley like never before. This is NOT 2000 FOR SURE. I say buy for longer term investing. some of these company's WILL make you rich in years out........
Just watch the Yen. We fall through 108 convincingly. Then you're looking at much, much further falls. It should ultimately hurt the commodity bubbles too though so that will, eventually, help the US get back on the comeback trail.
So far all the S&P is doing is putting in another higher high and higher low. I suspect this is one last move to suck in more shorts to fuel a blow off top rally into early Jan and then the bear starts. If you look at the chart, notice what the macd and rsi are at and what happens in the past when they are were like this. We just put in a 10% correction from the last top. We could move as low as 1370 but by year end the S&P will be back above 1415 Draw the long term trend line http://finance.yahoo.com/q/bc?s=^GSPC&t=5y&l=on&z=m&q=l&c=
Yep, I expect a morning rally tomorrow morning on covering and bottom fishing to sell into and then take the legs out and re-short into a rally.