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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