Friday, February 27, 2009

Stock Market Crash--25 year look--Chart


The chart below spans twenty five years for the S and P 500. Each bar is one month.

I have been writing for two weeks about the downside range expansion in the market (see previous posts). The range expansion is still in force. Last time, I mentioned that the market rarely closes lower 7 days in a row and it was due for a rally from the 741 area. The rallies which usually last two days came and went like the weather in Amarillo.

I want to issue a major note of caution here. The formation above could be signaling a market capitulation. Think about it like flushing a toilet. You know what goes down the toilet=, but then the bowl fills right back up. My guess is, if flushed it will be a great opportunity. Markets rarely capitulate, however, when everyone is looking for it.
A look at this long term pattern shows that the market is extremely vulnerable. The fundamental news, especially the size of budget deficit continues to weigh on the market. The only question now is do we go down slow or fast.

For today, the S and P will find good support on any thrust under 732. So don't get nutty with the short positions.

This will be the third straight week down and sixth out of the last seven. This indicates the market is due for a good rally soon. But from what level? New shorts at this level don't make much sense.
clipped from charts.barchart.com

Chart for S and P 500


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Bob DeMarco is a citizen journalist, blogger, and Caregiver. In addition to being an experienced writer he taught at the University of Georgia , managed on Wall Street at Bear Stearns, was CEO of IP Group, and is a mentor. Bob currently resides in Delray Beach, FL where he cares for his mother, Dorothy, who suffers from Alzheimer's disease. Bob has written more than 500 articles with more than 11,000 links to his work on the Internet. His content has been syndicated on Reuters, the Wall Street Journal, Fox News, Pluck, BlogCritics, and a growing list of newspaper websites (15). Bob is actively seeking writing assignments and syndication.


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