Earlier this month, the Dow made two runs at 9,000 before moving back toward the 8,500 range, which brings Dow 8,000 back in to focus. For those investors who may not follow indices closely, the 8,000 level has psychological but not technical support, the latter of which measures such things as the number of investors who are buying and selling, whether investors are committing new money to the market, and so on.
The issue: U.S. economy's health
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, that the worst news is behind us and that government stimulus, fiscal and monetary, will get the economy moving again.
The Dow Wednesday closed below 8,419. If the bears can keep the Dow below 8,000 then push it through 7,800, then 7,600, it will not be a pleasant time for investors.
Further, with most trading desks half-staffed during the last two weeks of the year, nothing definitive regarding the market's direction is likely to occur before the new year. Also, institutions may continue to sit on their hands in early January 2009, preferring to await the Obama Administration's inauguration and the announcement of the fiscal stimulus package's exact size, now believed to be approaching $800 billion over two years.
Even so, let's do a condensed, cross-methodology analysis to see if we can arrive at an informed investment analysis 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. The Fed will use quantitative easing to ensure that the credit markets and key institutions remain liquid.
Fiscal Policy: A large fiscal stimulus package, possibly as big as $800 billion over two year, is on the way. Bullish.
Credit Markets: Recovering, but still strained, with still too much interbank distrust and fear. Not enough banks are providing credit to where it's needed: for commercial operations. Small businesses and consumers are having a hard time obtaining credit. Bearish.
Conclusion: The view from here argues that the outlook for U.S. stocks and the U.S. stock market is bearish at least for the next three months, and most likely through Q2 2009. Further, if Dow 7,600 doesn't hold, the market could fall much more, particularly after 2009 earnings estimates are revised downward, as they are expected to be.
Market Analysis: The Dow's path of least resistance, from a technical standpoint, is down. There's technical support in the 7,300-7,600 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)
12-26-2008 @ 9:39AM
NICK said...
tHE ONLY WAY WE WILL EVER GET THE MARKET BACK IS THAT ALL THESE THUGS WHO TRADE IN THE MARKET ARE GOING TO HAVE TO PAY A HEAVY INSURANCE TO COVER THE FOLKS WHO DON'T KNOW THEY ARE CROOKED, LIKE BARNEY. IF THIS DOESN'T HAPPEN YOU CAN KISS THE MARKET GOOD BY AS IT STANDS TODAY. THE FAITH THAT THESE THUGS, AFTER WATCHING MSNBC SHOW WHERE THEY SHOWED THESE JEWS LIVING THE HIGH LIFE. SOMEONE HAD TO PAY SO THESE THUGS COULD HAVE SEVEN OR EIGHT EXPENSIVE HOMES, BUY PLANES AND BOATS ECT. THEY DID THIS ON THE BACKS OF US LITTLE 401K SLUGS. THIS IS WHAT IS WRONG WITH THIS COUNTRY. THE POOR SLUGS OUT HERE GIVEN TO CHARITY AND THESE ASS HOLES LIVING IN 20 MILLION AND UP HOUSES, HAD ONE WOMEN ON THEIR WHO MADE 20 MILLION AND SHE WAS GREEDY, SHE WANTED MORE AND WANTED TO LIVE ON THE OTHER SIDE OF NEW YORK, THIS MAKES THE FOLKS DISGUSTED WITH THE SYSTEM. ONE GUY HAD A BUSINESS OF AIRPLANES AND HE CHARGED 25 THOUSAND A YEAR JUST TO BELONG TO HIS LITTLE CLUB, GIVE ME A BREAK. YOU THINK WE SHOULD FEEL SORRY FOR THE SLUGS WHO WITHE LIVING THE HIGH LIFE IN PLAM BEACH AND BERNIE TOOK THEIR MONEY, HE IS JUST THE TIP OF THE ICE BERG IF THE TRUTH IS EVER KNOWN.
12-26-2008 @ 11:08AM
The Flash Of New Jersey said...
ALL I SEE IS " KING " BLOOMBERG OF NEW YORK , GOOD OLD BENNIE MADDOFF , SEN. WIENER OF N.Y. , HILLARY " I SOLD MY SOUL TO THE JEWS IN NEW YORK " CLINTON , AND THE LIST GOES ON AND ON. BORO PARK IN B'KLYN , LAKEWOOD , N.J. , THE CATSKILLS IN UPPER N.Y. , ALL HV PEOPLE THERE THAT NEVER SEEM TO PAY ANY TAXES , SERVE IN THE ARM FORCES , WORK FOR EMS , FIRE DEPT , POLICE FORCE , BUTT THEY ALWAYS HV THE MOST TO SAY ON EVERYTHING TO DO W/H MONEY IN THERE AREA OR IN THE COUNTRY...... WHEN DO THE AMERICAN PEOPLE WAKE UP ??? , MY THINKING IS " ALOT SOONER NOW THAN LATER " FOR WHAT THESE PEOPLE BANK ON ..... AND WHEN THE GIANT WAKES UP U WILL HEAR " ALL THE CRYING FROM THEM " WHY ALWAYS US "......
12-26-2008 @ 11:24AM
SassyFrassy said...
Prior to 911 wall street was riding on a 25 year high which everyone said wall street couldn't sustain then since the market is a cyclical thing. So, what we should want to see a continued gentle sideways move in the market. Every American should make sure that Wash Dc applies the 'brakes" to spending and that ceilings, caps are applied and that 'everyone' in bailout pays the money back.
The bailout found out days ago will derail the economy combined with the DEMS heafty track record of faulty fiscal spenditures will hasten the bankrupting of the economy. In 2017 yes, that's less than 9 years from now the bailout bill funds are due and payable and if we cannot pay it back we will be bankrupt like cuba and owned by foreigners whom subscribe to SHARIA LAW.
Prior to 911 it was the DEMS whom told US law enforcement to go home when they went to arrest bin laden because the yemen ambassador made a big 'stink" claiming we were turf infringing. Well, unbeknowngst to the DEMS that allowed for the groundwork and planning of 911 to proceed. yet most americans don't even realize bush hadn't brushed the conffetti off his suit when 911 happened?
Then in 1999 in a congressional investigation the NYTIMES printed how Clinton admitted it was him and Acorn faulty lending practices that would and did bring meltdown.
Sharia Law has been deliberately "mislabeled" as "fairness doctrine" because they don't think American's are smart enough to look further than the title or research to find out that what it "really" means is --it is punishible by law to anyone to claim the murders, crimes committed by muslim/islam/sharia law are 'bad". It also condones female mutilation and beating and abusing of women. It also means it illegal to be any religion OTHER than muslim.
So we need to make sure we have WASH DC iron-clad protect all our freedoms from flag, seal, allegience and we need to legally and LEGISLATIVELY make it clear to WASH DC that WE THE PEOPLE will have long, long memories if WASH DC attempts to 'shirk" it's responsibility to protect WE THE PEOPLE.
12-30-2008 @ 5:50AM
Adam Smith said...
A Specific Application of Employment, Interest and Money
Plea for an Adventure in a New World Economic Order
Adam Smith, Karl Marx, John Maynard Keynes and Alan Greenspan: a Unified Perspective
Abstract:
This tract makes a critical analysis of credit based, free market economy, Capitalism, and proves that its dysfunctions are the result of the existence of credit.
It shows that income / wealth disparity, cause and consequence of credit, is the first order hidden variable, possibly the only one, of economic development.
It solves most of the puzzles of macro economy: among which Business Cycles, Stagflation, Greenspan Conundrum and Keynes' Liquidity Trap...
It shows that Adam Smith, John Maynard Keynes, Karl Marx and Alan Greenspan don't contradict each other but that they each bring a meaningful contribution to a same framework for understanding macro economy.
It proposes a credit free, free market economy as a solution that would correct all of those dysfunctions.
In This Age of Turbulence People Want an Exit Strategy out of Credit, an Adventure in a New World Economic Order.
Read It.