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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