Once again, Dow 8,000 has come back into focus. For those investors who may not follow indices closely, the 8,000 level has a psychological but not technical support, the latter of which measures such things as the number of investors who are buying / selling, whether investors are committing more money to the market etc.
Even so, right now, a battle is taking place between the bulls and the bears: the bears argue the worst economic news stemming from the financial crisis is yet to come; the bulls argue that the worst news is behind us, and that government stimulus, fiscal and monetary, will get the U.S. economy moving again.
The Dow Jones Industrial Average Wednesday closed below 8,000 at 7,997. If the bears can keep the Dow below 8,000 and then push it through 7,800, then 7,600, it will not be a pleasant time for investors.
Let's do a condensed, cross-methodology analysis to see if we can arrive at an informed investment decision / conclusion regarding where the Dow is headed, near-term.
- Technical Indicators: Bearish.
- Fundamental Indicators: Bearish.
- Monetary Policy: Officials are doing everything they can to stimulate growth. Bullish. Another U.S. Federal Reserve interest rate cut may be ahead, but it's not likely to have much effectiveness if banks continue to be reluctant to lend.
There's also talk that the Fed may create another term auction facility, to further increase liquidity, or take other action to address related private sector bank concerns. - Fiscal Policy: More fiscal stimulus should be on the way, in both the U.S. and aboard. Bullish.
- Credit Markets: Recovering, but still strained, with still too much interbank distrust / fear. Further, widening spreads on Citigroup's (NYSE: C) credit default swaps (a form of credit default insurance), suggests investors are increasingly concerned about a Citigroup default and are willing to pay more to guard against it. Bearish.
Market Analysis: Underscoring -- there's technical support in the 7,800-7,600 range but not much after that, which is why the psychological 8,000 level is important: it's not as strong a barrier as technical support, but it's 'the barrier before the barrier' -- and the goal is to avoid testing the last support, if possible.
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Reader Comments (Page 1 of 1)
11-20-2008 @ 10:48AM
Dan Barnett said...
GM & F are on the verge of bankruptcy & some think that's a good idea. Freddie & Fannie are risking de-listing on the NYSE. Half-a-million NEW jobless claims last week. The Fed doesn't have room to cut that much more. (Where do you go from 1%?)
There's enough bad news to go around.
I'm betting against 7800 holding today, but we really won't know until the last hour. But I'm with Chicago Football.
11-20-2008 @ 4:01PM
Forrest Freedman said...
I guess all the Rich people that Obama said he would throw under a bus if he got elected, were smart enough to get out of the market while capital gains tax was only 15%.
The rich paya majority of the taxes and when the president -elect sends signs that he is going to do exactly what he says on January 20, 2008, don't blame the people who pay a majority of the taxes for leaving the market with the middle class and poor left holding the bag.
Shame on you President- Elect Obama for causing hysteria in the markets with your pro socialist redistribution tax tax tax mentality.
Sure in great markets the rich get richer, but so does everyone else and when you scare the rich, they just take their money and sit by the ways side, which is something that the poor and middleclass can't do without extreme penalties to their 401Ks.
I bet John Mccain is having one heck of a good laugh now...but the real joke is on the American people who were suckered by Media types like smug Charlie Gibson and all the Marxists at CNBC, who tricked the american people into voting for TERRIBLE CHANGE called Obama/Biden.
11-25-2008 @ 2:09PM
Warren_Buffett said...
Forrest Freedman,
You are nothing but a pathetic weasel and a sore loser. Your senile old candidate got his ass kicked horrendously in the election and now you come up with some specious argument about how the current financial crisis is Obama's fault? YOU ARE SUCH AN IDIOT IN TRUE REPUBLICAN FASHION!
Forrest, life IS like a box of chocolates. Trouble is, you Republicans gorge at the troth like pigs and get the brown goo all over your faces! Gee, come to think of it, I HOPE it's chocolate. Smells like $hit though in your case!
11-20-2008 @ 9:09PM
Bruce said...
Hay Forest, how's your 401K ? Probably don't have one you sound like a LOSER