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I don't believe it. Fundamentals caused the 10% drop and
fundamentals will hold it up. Christmas spending will, (in my
opinion), be much stronger than the outlook and the over-all economy is
good, if not "strong". Sentiment is poor due to gasoline
prices and housing drops which depleted "piggy bank home
equity" but mostly because of the press saying things are bad.
We are at virtually full employment and the economy is just fine.
Sub-prime is a mess created by the banks and they got themselves into the
mess because of greed. There is no problem getting a prime mortgage
and there shouldn't even be sub-prime mortgages unless the lenders want
to put up their own money and not their depositor's money for worthless
paper. So, all credit worthy customers will not have a problem with
tight money, the economy is good, we have full employment, low interest
rates which are about to get lower and low tax rates which will stay low
for another year. I fail to see a problem. Still, as a
contrarian, I welcome "foot holds" in the wall of worry for the
indices to climb.
Bob
At 08:20 PM 12/8/2007, you wrote:
Sent: Saturday, December 08, 2007 3:39 AM
Subject: False Breaks Warn Of A Market Top
False Breaks Warn Of A Market Top
By Colin Twiggs
December 8, 2:00 a.m. ET (6:00 p.m. AET)
These extracts from my trading diary are for educational purposes and
should not be interpreted as investment advice. Full terms and conditions
can be found at
Terms of Use.
USA
Dow Jones Industrial Average
The Dow Jones Industrial Average is rallying in anticipation of a
rate cut at next weeks FOMC meeting. It is doubtful whether providing
banks with cheap money will encourage them to resume lending in a market
with falling asset prices, but it may improve their ability to carry
non-performing assets rather than being forced to sell at fire-sale
prices.
Probability of a bear market remains high: at least 2 to 1. Current
activity resembles a market top, with failed upward/downward breakouts
accompanied by heavy volume.
Twiggs Money Flow continues to display a
large bearish divergence, signaling long-term distribution.
![dow jones industrial average medium-term chart]()
Short Term: Declining volume and a
doji star candlestick pattern indicate
that the rally is losing momentum. Reversal below 13500 would warn of
another test of primary support at 12800, while respect of 12800 would
signal a test of resistance at 14200.
![dow jones industrial average short term chart]()
I knew what to do..... Tape reading was an important part of the game; so
was beginning at the right time; so was sticking to your position. But my
greatest discovery was that a man must study general conditions, to size
them so as to anticipate probabilities.
~ Jesse Livermore in Edwin Lefevre's
Reminiscences of a Stock Operator
(1923).
To understand my approach, please read
Technical Analysis & Predictions in
About The Trading Diary.
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