Worst Ever Market Decline on (Obama's) Inauguration Speech

WASHINGTON -- He called them "gathering clouds and raging storms," "icy currents" in a "winter of hardship." But as Barack Obama spoke to the country for the first time as president, the world beyond Washington was filling in details of the hardships that he alluded to in his inaugural address.

Even as he finished the oath of office, the crisis in the financial services industry sent banking stocks plummeting, and the Dow Jones industrial average turned in its worst Inauguration Day performance in its century-plus history, losing 4 percent of its value.

Today will be telling. It should go up 150, 200, maybe more. If it doesn’t, I would say yesterday was more than a bear market down spike and was probably a mile marker on the road to 7000 or less. There’s a lot of bad psychology at work right now though. I’m trying to stay out of that and stay focused on the fundamentals, on the key economic indicators, and the other indicators such as foreclosure rates.

John Tobacco on locatestock.com has been predicting DOW 7500 since the start of the meltdown. He's been right all along so you and he may be correct about the final bottoming point...of course there is always DOW 0, which is the ultimate stop point.

I once worked for a now famous Mutual Fund manager who once told IBD during the 1987 collapse that he saw DOW 5k. I was standing there with a friend of his, an Investment Banker who was a former A6 pilot from the Nam who had crashed land three different Intruders into the Gulf of Tonkin, and he said yes that might be possible. I thought it was quite a reach, particularly after what had just happened, however I was a newly wed and needed the job and so I simply went along. Everyone else had the same thoughts that I had, ...NO WAY. Sure enough, my friend was correct and I was smitten.

There is an old technical correction method known as the Goodman Wave. What is involved is an oscillation of five up and down waves with the down waves being approximately a 50% retrenchment from the top. So if we peaked at 15k the final bottom on the retreat should be about 7.5k. Expect a "dead cat bounce" of about 50% of the retreat on the upside. Therefore, we should see a DOW of about 10.75 k on the upside with another retreat of about 50% from the "dead cat" bounce top. If this trend continues on the upside, then the market may resume forward motion and would signal a recovery. However, if it doesn't occur or the DOW enters an oscillating trading range then we shall enter a prolonged bear market indicating an economy with stagflation.

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