Uncertainty abounds  

Posted by Book Eater

The DJIA lost 507 points last week.

Bob Pisani of CNBC mentions that the reason markets are yawning despite the Bush stimulus plan of injecting 1% of GDP to people to boost consumer spending care of tax rebates is because of uncertainty.

He tells that
a.) It's still not clear how much the U.S. consumer is slowing down, except that several companies this week such as Citigroup took provisions for their eroding credit quality.

b.) The extent of the global slowdown is not yet evident. Bears say it is coming; there are already signs of weakness in Europe, particularly the U.K.

Albert Bozo writes "Forget rate cuts and stimulus packages. In Wall Street's eyes, the recession is already here and the credit crunch is far from over."

Most everyone in Wall Street thinks the sell off is likely to continue.

Chartists believe that a drop below the 12,000 psychological level would only help confirm the worst fears of investors - the onset of a bear market.

Stovall says the market is entering a "typical pre-recessionary mode."Stocks typically fall from their high nine and a half months before the onset of a recession, bottoming out six months into the recession for an average decline of 26 percent from top to bottom.

Using that model, this time around, stocks have been falling since their Oct. 9 record high, a recession will start in July and the market will touch bottom in January 2009.


End of Bad News for now


So everyone in Wall Street is really turning bearish with one person using statistics to tell him historically the the market will touch bottom January 2009. Wow! That's still next year! What will an average investor do then for the rest of 2008?

Chartists are right that a drop below the mental support of 12,000 will only bring us to more sell-offs. Market tone is essentially uncertain. I suppose the only right thing to do in this climate is to just sell if you have any positions left. But perhaps a range trading environment can ensue. Not a bear market. Well, let's allow the charts to tell us and make rational bets instead of predictions.

Side note:
A movie entitled "Cloverfield" is said to be setting a record for its January movie release. A horror movie about a monstear tearing up the whole city. Hmm, will probably watch even if I am not a fan of horror movies. Care to join me?

- Nix

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