Posted on 02/28/2009 11:18:50 AM PST by arkadyka
I have not done a stock market post in a while, but this one is important considering the latest developments. The latest time I spoke about Dow 7000 and why a hold of that support line is extremely crucial.
Unfortunately it seems like the break will happen inevitably and doing so will essentially open the flood gates. I have provided a chart for you that someone else made and it illustrates a very obvious long term pattern, a chart of the S&P 500.
Don't mind the wave count, but do realize that flirting with 2001 lows really illustrates the weakness of this market. If in the next few weeks Dow 7000 or in this case S&P 750~ is broken then expect the market to shave off another 50% of it's value! There is good news in all of this though, once a breach of that vital support occurs, a reflexive bounce will occur via a powerful bear rally. Thi rally could be a 30-50% move and will provide an opportunity to exit all long-term positions, however for the most part it will only suck more unsuspected individuals into a powerful move down to the ultimate lows of (Dow ~4000, S&P ~400). This happens in history all the time and will happen again.
If these long term projections are met, then it might take anywhere from 5-12 years to recover back to the highs of 2007!
I call this the Obama stock market because his administration and his policies are completely and utterly responsible for this vicious sell off. Even though the financial collapse is not his doing, the amount of damage his promises and policies do to the market cannot even be measured.
(Excerpt) Read more at rkdpolitics.blogspot.com ...
Absolutely, fibbonaci retracement numbers have a very strong correlation and I have used them in all sorts of time periods.
Nothing is consistenly accurate because markets are subject to external forces.
The Fibonacci levels are along the lines of self-fulfilling prophecies: technical traders pay attention to them and make big bets using them; that, in turn, pushes the markets towards the levels.
There is an automatic switch that will close the market at a certain loss, but it will reopen shortly after. If a decline of 20% needs to happen, it will happen.
They might try some stupid crap like ban shorting again.
I'm not a big fan of them...but now and again I take a gander at them...
FWIW-
I’m totally cash, as well. Nothing left in the market - not even in my 401k. I could see this trainwreck last spring. I knew the last administration would do everything in their power to prop up the market until Ossiah took office, but it shouldn’t be long before along big drop.
Yes, I meant that the 741 lows of Nov. 20 and Monday or Tuesday of last week were violated Friday. So for the next 2 or 3 days, human psychology really comes into play. Increasing the possibility that something incredibly bad could happen in the short run.
YOU may not pay attention to them, but vast armies of traders DO. So, you may argue that “support lines” are thus self-fulfilling and not natural. That’s a legit argument. Neverthless, if predicting and forecasting moves is your game, you’d probably be quite amazed, skeptical as you may want to be, how rallies and declines very, very often (and I don’t mean 51% of the time, I mean upwards of 85% of the time) stop DEAD NUTS on 38.1%, 50%, and 61.8% Fibonnaci lines. Uncanny.
As for vague equivocal commentary such as “first we rally, then we dump”, I agree with you, that isn’t especially useful.
“If these long term projections are met, then it might take anywhere from 5-12 years to recover back to the highs of 2007!”
This is bizarre thinking. Back before Jimmy Carter, the DOW kept to a trading margin of between 500-1000 for decades. Outside of a leveraged economy, it might have risen as high as 2000, with slow and steady growth. But at that point, market forces would have intervened, pushing it back down to the under 800 range.
However, an unnatural leveraged economy evolved apart from the real economy, based on Jimmy Carter’s efforts to manipulate the economy to his advantage. This perverted the market and caused outrageous stock price inflation.
So what should be look for over the next two decades? The value of the DOW over 2500 is unrealistic, and means that it still needs to contract. But by then the contraction will be tamer and take years of adjustment.
An eventual return to a 1000-2000 range will return with the rebuilding of American industry now outsourced. And this will signal the recovery from our economic problems.
“Fibonacci series. Is that a reliable forecaster?”
If you looked into it, even fairly casually, you’d probably be stunned to see their overall reliability. The question of whether their influence is “natural” or “self-fulfilling” is moot in the large sense, because, the fact of the matter is that large numbers of traders and trading computers (which are responsible for at least 60% of NYSE activity) use and trade off these numbers. As a trader, your job is to try to predict trends or failures of trends or gap-fills and try to get in front of them. No, fib lines aren’t perfect, and “tape bombs” and geopolitical events and dramatic news will trump fib lines, but in the absence of dramatic news, fibs are IMO pretty high-order tools for trading.
Don’t mind the wave count, but do realize that flirting with 2001 lows really illustrates the weakness of ohbamas plan he can’t understand that you can’t spend your way out of debt.
Read up on Technical Analysis. You’ll get a clue.
Now, now...lest we forget. Everything BAD that happens is Bush’s fault, that is, something Hussein inherited! Only GOOD things are results of Husseins management!
Nicola: Read up on Technical Analysis. You’ll get a clue.
I did read up a little and let us say I remain sceptical. However, I will admit that if this is a widespread way of analyzing the markets, then it is possible that it can be useful. Not because it is inherently correct, but because everyone else is seeing the same figures and are primed to react according to certain rules.
One cannot help thinking of the Long Johns.
he is an usurper without providing a constitutionally demanded evidence of natural citizenship. Let’s impeach him after a little more time passes and the people will be ready for that.
So, they made retirement nest eggs for themselves and only looked at Social Secuirity as icing on the cake.
Now Social Security is broke and Baby Boomers are starting to retire.
How does the gov't get Boomers not to retire?
Make their retirement nest eggs worthless.
Then ration healthcare so they can't live long enough to collect anyway.
Exactly.
“Nor do I put much faith in a prognosticator who says “We’re heading for a crash, but there could be a big rally first.” Hard to be proven wrong that way.”
Yes, it’s a ridiculous article.
I've never paid much attention to the S&P, I will monday and especially if it closes below 740. Two days below 740 = terrible days ahead.
And btw Blam, love your birdogging of the GGG posts. Always my first read!
Exactly. Mostly it’s used as an indicator, not as a crystal ball. After all news moves the markets as does TA.
It’s just a tool, not a guaranteed thing.
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