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Will the stock market lows of March 2009 hold, be tested, or breached?
renman95
Posts: 7,037 ✭✭✭✭✭
And with it the March and April lows of $GOLD?
It seems after a four month run, the major averages have stalled and show signs of gravity. Unemployment surpasses the administrations expectation of 8% and now expects above 10%. Cap-n-Trade, Global Warming summit, National Healthcare, talk of a second stimulus bill, and other taxi burdening issues are clouded by 24/7 MJ coverage. After the media fog and other summer diversions lift, it could be a long grind down...maybe close to those late winter lows.
If only 10% of the stimulus has been used and the rest to be unloaded in 2010...why...1) was there a hurry and 2)talk of a second plan?
If Cap and Trade passes the Senate, why burden the individual with even more taxes during a deep recession?
Why is a dramatic reduction in the American standard of living pushed on us now during a deep recession?
If National Healthcare passes this year, why burden America/taxpayer to "bazillions" during a deep recession?
Where is the money coming from to prop up the stock market?
As more questions arise the more confidence slips...and so goes the market, jmho.
R95
It seems after a four month run, the major averages have stalled and show signs of gravity. Unemployment surpasses the administrations expectation of 8% and now expects above 10%. Cap-n-Trade, Global Warming summit, National Healthcare, talk of a second stimulus bill, and other taxi burdening issues are clouded by 24/7 MJ coverage. After the media fog and other summer diversions lift, it could be a long grind down...maybe close to those late winter lows.
If only 10% of the stimulus has been used and the rest to be unloaded in 2010...why...1) was there a hurry and 2)talk of a second plan?
If Cap and Trade passes the Senate, why burden the individual with even more taxes during a deep recession?
Why is a dramatic reduction in the American standard of living pushed on us now during a deep recession?
If National Healthcare passes this year, why burden America/taxpayer to "bazillions" during a deep recession?
Where is the money coming from to prop up the stock market?
As more questions arise the more confidence slips...and so goes the market, jmho.
R95
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The short term is bleak, but the greater the snafu the more likely corrections can be made and the course changed.
Well, myself is confused about "shovel ready" projects. I've been in the architecture bidness for 30 years and never heard the term "shovel ready" until the stimulus thingy came to the forefront a few months ago. Is this some kind of political speak for the new construction or just the intent to have new construction? A reasonable assumption would be that "shovel ready" means that construction documents were prepared, approved, sealed and specifications completed and bids had been received or the project was complete except for bidding and the only thing lacking was funding. The economic stimulis package was advertised as the solution to our economic crisis because of the increase in employment and the uptick in consumption of construction materials that would result from repairing our public infrastructure on a national scale. Seems like when they were talking about it was imperative that the congress just had to pass it right now. So, unemployment is at about 10% and rising and I'm not seeing a lot of shovel work going on but maybe I was thinking of the old timey kind of shovel where people dig stuff up and build new stuff with them. Maybe I'm just confused?
Where is the money coming from to prop up the stock market?
From the TARP and bailout (ransom) monies. The banks took that and traded with it for months to help prop up the markets. After making a lot of money on that, they can afford to start giving the principle back.
roadrunner
<< <i>"Shovel ready" is a reference to hay. The drawings and specs are by definition completed.
Where is the money coming from to prop up the stock market?
From the TARP and bailout (ransom) monies. The banks took that and traded with it for months to help prop up the markets. After making a lot of money on that, they can afford to start giving the principle back.
roadrunner >>
If they give the money back. Some banks want to but may not be allowed to. And then what happens when the TARP is depleted and there is no organic growth to follow on? I don't see much growth going forward with the individual, two-thirds of the economy, when they have to pay extra "climate taxes" and "energy taxes" and "health taxes" if they all pass. And these added "fees" are on top of their higher debt load and lower asset values. TARP money can only go so far. And how many times can the administration go to the trough?
Some say the recovery is an "L" shaped one. Maybe it'll be a "U" or "W". I think if the aforementioned taxes and fees are imposed we will be in an "X" shaped recovery. The USA will go "" meaning our standard will be dramatically reduced and the "/" means the rest of the world (excluding western nations) will have a higher standard regardless of emissions. I don't see how the "/" will actually go to who needs the $$. I think a large portion will just go to the "bankers" for services rendered. They have had a long history of redistribution.
R95
the thing to do is to watch to see if the March lows are tested or broken and if they are expect further losses.
on the other hand, the market might arrest its decline before the March lows are reached or it might stop the fall at the March lows.
I dont have a crystal ball... it was smashed in the Northridge Earthquake. But my stored memory of technical analysis says to watch the charts and move accordingly.
As Ive mentioned before I have been out of stocks for several years.
However, I believe that Wall Street leads Main Street by six to nine months, and frankly I hope the stock market gains because that will help consumers and businesses, and my clients and hopefully my business as well.
If you are long stocks, Im on your side and hoping you see higher prices. But I don't know...
www.AlanBestBuys.com
www.VegasBestBuys.com
I dont have a crystal ball... it was smashed in the Northridge Earthquake. But my stored memory of technical analysis says to watch the charts and move accordingly.
/
My in-laws live in Northridge (epicenter) and they lost more than a crystal ball. I remember having to bring water to them in gallon jugs. People were selling a gallon at $5 a pop.
As far as charts, I say we correct and if we don't reach the March lows but retrace half and then go higher that would be bullish but only short term. A higher low would signal a lot of a sideline money to jump in that missed this entire run up. But I think that will set us up for a major bear trap for next year. I still contend that the recovery is a long time coming. I remember the California RE peak in 1990 did not recovery until late into the decade. This RE crisis is much worse than that localized one in California.
R95
The system that allowed the credit bubble to form and burst hasn't been fixed. The same people are running finance and Congress. The same corrupted institutions are still in place.
If they dump money into it, the market will go up. If they keep holding onto the money, the market will go sideways at best.
This whole "money" thing is really starting to confuse me. First, they lose it (after getting paid commissions on the deals). Then they create more and stuff it into the banks. Then the banks don't lend it out, but use it to repair their balance sheets instead. (And the charlatans who lost the money get to keep their jobs, by the way.) Then the government wants to create more money.
Why not just print Monopoly Money and give $100,000 to every man, woman and child in America - and dispense with all that bothersome work-a-day routine?
It would be like "Carnival Night" back in my old home town, when everyone went to the gym and got money to spend on throwing bean bags at the holes in the board, or the cakewalk, or spending some of it to get someone thrown into "jail" for 15 minutes?
Besides being more fun, it would be cheaper in the long run than what they are doing now.
I knew it would happen.
With CD rates and Treasury bill rates back to below 1%, there is large group that wants more than 0.5% annually on their money, but are afraid of jumping in after such a big run up in stocks. At each 5% down in the market, there will be some folks willing to get back in. If the decline becomes too sharp, folks will get scared again. However, relatively slow moving drops (slow moving compared to the action from January to March) like the market has been seeing is close to ideal for pulling money off the sidelines.
Right now there is a very short term potential head-and-shoulders on SPY with a neckline at 87.5. If it breaks down, 80 would be the next downside target for SPY. It was breached intraday, but so far, not end of day. SPY 80 I would see as a very good entry point for longs. I see the 200 day moving average as a whipsaw point. Quite a few folks use that indicator for long term timing, so the most frustrating scenario would be several moves above and below that line to get folks to switch their long term money in, then out.
"Why not just print Monopoly Money and give $100,000 to every man, woman and child in America"
That would equal about 35 trillion dollars but you may be right, that would solve the problem and when considering the liabilities created by the other proposed expenditures, it may actually be a bargan in the long run. GDP for U.S. is about 15 trillion/yr
PE's are high, comrade. Stratospheric, in fact. Is good? No, not good. Is beeg bummer for stok market. Earnings ees not so good, too. Earnings estimates for to sink like rock. Beeg rock. Massive Rock. Kaplush!!!! Is like 1908 beeg hole in Siberian Forest!!!!!
If I had any money in the stock market, I'd be planning to vacate the premises real soon. But I don't. Got any of those California IOUs? Collectors items? Nah, prolly not.
I knew it would happen.
This will take a long time.
The question is: do we continue to slide down the 200dma on the major indexes for another year or do we do some sideways action?
I'm trying to find the other shoe.
R95
<< <i>I'm still short the S&P from 934, and am looking for lower lows to come. Might as well trade both sides. Its pretty much the same just upside down..
Nice play, good on ya!
<< <i>All I know comrades, is that for a recovery to be sustainable and organic we don't need Cap-n-Trade or other untimely imposed fees/taxes/dues/contributions to bog down consumer spending.
This will take a long time.
The question is: do we continue to slide down the 200dma on the major indexes for another year or do we do some sideways action?
I'm trying to find the other shoe.
R95 >>
been short
silver & oil
zsl,ery
I may short some consumer discretionary names or use an ETF b4 earnings MON
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With so many people trading the dma's, I vote for a sideways market that takes their monies. We already had a local radio "expert" proclaim a BUY when the market blipped above the 200 dma that one day. I think they're going to take his money and everyone else like him.
Dow chart 1929-1936 (Sorry, it's an interactive chart, so plug in the dates in the boxes middle right)
Another interesting observation (if you get the chart right) if you assume the July 1932 is the same as the March 2009 low, look at the snapback to the 200ema and the downward-sideways movement until April 1933. From the trough to the peak the April 1933 Dow is nearly a 50% retracement of the huge July 1932 runup. In 2009 terms, 8800 - 6626 = 2174/2 = 1087, 8800 - 1087 = 7713 as the Dow low in this downward-sideways movement over the next few months.
Of course if it were this easy I would be a bazillionaire.
I'm not so sure that the May 2008 through March 2009 equates October 1929 through July 1933. There may more attached to March 2009 end of the chart.
Just havin' some fun this morning.
R95
jmski would like to be bazillionaire! party down! invite heads of state! oh yeah!
I knew it would happen.
The Dow/gold ratio has trended back towards 1 in every major recession of the last century. And the waves if anything are getting more severe due to the larger imbalances of credit/fiat. Assuming a modest 3-1 Dow/ratio and gold reaching an inflation adjusted value from 1980 of $2200, takes the Dow to 6600. Unfortunately I don't see gold stopping at $2200, which means the Dow would have to fall further. We are in the process of correcting a wave that began at around 1000, it seems more likely to me that the March low won't hold over the next year or two. Where are the necessary changes in business, real estate, etc. that will ignite the necessary growth?
roadrunner
The banking industry had been seeking the repeal of Glass-Steagall since at least the 1980s. In 1987 the Congressional Research Service prepared a report which explored the case for preserving Glass-Steagall and the case against preserving the act.[7]
The argument for preserving Glass-Steagall (as written in 1987):
1. Conflicts of interest characterize the granting of credit — lending — and the use of credit — investing — by the same entity, which led to abuses that originally produced the Act.
2. Depository institutions possess enormous financial power, by virtue of their control of other people’s money; its extent must be limited to ensure soundness and competition in the market for funds, whether loans or investments.
3. Securities activities can be risky, leading to enormous losses. Such losses could threaten the integrity of deposits. In turn, the Government insures deposits and could be required to pay large sums if depository institutions were to collapse as the result of securities losses.
4. Depository institutions are supposed to be managed to limit risk. Their managers thus may not be conditioned to operate prudently in more speculative securities businesses. An example is the crash of real estate investment trusts sponsored by bank holding companies (in the 1970s and 1980s).
The argument against preserving the Act (as written in 1987):
1. Depository institutions will now operate in “deregulated” financial markets in which distinctions between loans, securities, and deposits are not well drawn. They are losing market shares to securities firms that are not so strictly regulated, and to foreign financial institutions operating without much restriction from the Act.
2. Conflicts of interest can be prevented by enforcing legislation against them, and by separating the lending and credit functions through forming distinctly separate subsidiaries of financial firms.
3. The securities activities that depository institutions are seeking are both low-risk by their very nature, and would reduce the total risk of organizations offering them -- by diversification.
4. In much of the rest of the world, depository institutions operate simultaneously and successfully in both banking and securities markets. Lessons learned from their experience can be applied to our national financial structure and regulation.[7]
Financial events following the repeal
The repeal enabled commercial lenders such as Citigroup, which was in 1999 the largest U.S. bank by assets, to underwrite and trade instruments such as mortgage-backed securities and collateralized debt obligations and establish so-called structured investment vehicles, or SIVs, that bought those securities.[15] Elizabeth Warren,[16] co-author of All Your Worth: The Ultimate Lifetime Money Plan (Free Press, 2005) (ISBN 0-7432-6987-X) and one of the five outside experts who constitute the Congressional Oversight Panel of the Troubled Asset Relief Program, has said that the repeal of this act contributed to the Global financial crisis of 2008–2009,[17] [18] although some believe that the increased flexibility allowed by the repeal of Glass-Steagall mitigated or prevented the failure of some American banks.[19]
Arguments for and against repeal of Glass Steagall Act
If I'm reading this correctly, the arguments in favor of the repeal proved wrong, and the arguments against the repeal proved correct. Of course, Congress went with the wrong decision. You gotta wonder, or maybe you don't. I believe that Jim Leach (a Republican by the way), one of the sponsors of the repeal, is/was a stockholder in Davenport Bank, and he's not doing too badly.
My understanding is that Joe Kennedy made much of his fortune in stock manipulation during the 1930's as part of "dark pools" of capital that were virtually unregulated at the time, similar to the massive hedge funds, derivatives and now, ETFs. Of course the comments on the aftermath of the repeal of Glass Steagall are most interesting...
These banks are worse than parasites. They are in fact dangerous to us all.
I knew it would happen.
<< <i>I'd be more inclined to believe that 2009 is more like 1937. The only difference being is we don't yet have a WW on the horizon to bail us out after a few years more. The market first took a plunge in 2000, that to me was similar to 1929. We escaped that by massive injections of cash over the next few years. That step was not done in 1929, when in fact the money supply was contracted 37%. One could say that the recovery from 2003-2007 was similar to 1933-1937. There are more differences betw today and the 1930's than there are similarlities.
The Dow/gold ratio has trended back towards 1 in every major recession of the last century. And the waves if anything are getting more severe due to the larger imbalances of credit/fiat. Assuming a modest 3-1 Dow/ratio and gold reaching an inflation adjusted value from 1980 of $2200, takes the Dow to 6600. Unfortunately I don't see gold stopping at $2200, which means the Dow would have to fall further. We are in the process of correcting a wave that began at around 1000, it seems more likely to me that the March low won't hold over the next year or two. Where are the necessary changes in business, real estate, etc. that will ignite the necessary growth?
roadrunner >>
I like the 1929 is 2000 and 2009 is 1937 observation. If that is the case then a very rough sideways pattern is in store for the next 5 years [2014, all thing being linear,
"Where are the necessary changes in business, ........that will ignite the necessary growth?" Right, it seems the lessons have not been learned and "the powers that be" are compounding the mistakes made just a few years ago, so I think the market has not hit bottom yet. The more the recovery is put off, now late 2010 by many experts, the more negativity will run the market down. I just watch what J6P is doing, heck, I'm one of them...I have cut on spending yet life happens. When I have work done around the house that I can't do, it seems that the businesses involved don't realize that there is a recession. I seem to pay out more for services, food, insurance....but my employer pays me less. So I do less and less as a consumer. It's family time...(always has been). But these are fighting words when it comes to diversions and consumerism which runs a large portion of our economy.
I sadly agree that the March 2009 lows will be taken out at some time. I thought we would hit the "4's" this last March. I wasn't that far off. There is more to play out......
The pendulum swings of debt, taxes, missteps seem to get larger and larger and the correct steps required to right the economy are not on being performed. It's almost like the opposite is being planned, like a planned destruction. It's all very frustrating.
R95
None of 'em are. Gotta draw them with a crayon, not an exact-o knife.
Some say the recovery is an "L" shaped one. Maybe it'll be a "U" or "W". I think if the aforementioned taxes and fees are imposed we will be in an "X" shaped recovery. The USA will go "" meaning our standard will be dramatically reduced and the "/" means the rest of the world (excluding western nations) will have a higher standard regardless of emissions. I don't see how the "/" will actually go to who needs the $$. I think a large portion will just go to the "bankers" for services rendered. They have had a long history of redistribution.
R95 >>
(written 7-7-09)
/
I was reading Robert Reich's "When Will The Recovery Begin? Never" on 7-9-09. I usually take him with a grain of salt but he made a prediction that sounded familiar.
He speaks of the consumer leading us out of the recession, OK. They can't borrow, OK. A recovery can't be built on replacements (cars and appliances...), OK. Businesses won't invest if the consumer won't participate, OK. Don't rely on exports, OK. Then he makes his prediction that the recovery will not be a V or U but an X(!). He doesn't explain what the X is other than a new economy and "more on this to come." Knowing his stance, the new economy will be a larger government controlled economy. I think his solution will dovetail with my explanation of the "X-recovery."
I'm curious to read what his "more on this to come" solution will be.
R95
I guess a rosy picture is to be painted so that Joe-retail can go in and prop up the market above 10,000/1,000. Another new bubble in the workings. Get everyone back in, the waters fine and then pull the rug out...again.
When I start seeing all these rosy pictures with a worsening backdrop, it makes me worry. I haven't seen my personal picture get any better, empty storefronts, more for sale signs....
R95
> I haven't seen my personal picture get any better, empty storefronts, more for sale signs....
It's surprising how slow things are. 7th highest per capita income county in the USA and two of our high end malls were almost empty during recent prime time visits. The Apple store was the only place buzzing.
This is to be COMPLETELY expected.
The US is over retailed. We simply have too many retail shops. Seems every block is a strip mall of some sort. The US has excess capacity brought about by easy lending and a zero savings rate. Lending is tightening and people are saving. This is all GREAT news for the longer term, but you should expect that millions of people will remain out of work and that many businesses will not return. Believe it or not, this is all good for America.
Knowledge is the enemy of fear