Prepare for the worst, and hope for the best for the coming months
By Daniel at 29 November, 2008, 2:54 pm
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My DJIA index charts show a definite long-term down-sloping trend beginning with the October 15, 2007 High of 14,157.38. Within that long-term trend there is also an intermediate down-sloping trend line dating from December, ‘07, and a short-term down-sloping trend line dating from mid-September to date, including the low volume retracement of the past five trading days (recognizing that we may have barely broken it Friday to require a slight adjustment to the short-term trend line). Coincident with this short-term trend there is also a down-sloping wedge. Funny thing is that I missed the pennant a week ago Friday leding into the five-day retracement that shows up on the ten day chart. Now the substance of all this is that to me the indicators are that we are in a continuing shrply-declining down-trend and that we are due very shortly, before the end of January, to break downward below the wedge through the resistence in the 8,000 area and it could be in a free fall down to the next support area below 4,000. I note that the Fibonacci retracement from the 10/15/07 high of 0.618 has been met by the 7,392 low of 11/21/08, and that the 0.5 retracement to 7,079 and the Fibonnacci retracement of 0.383 to 5,408 remain unfulfilled.
All of this tells me that we have a long, long way to go downward in the markets before we finally “bottom out” and start a long, slow economic recovery. Therefore, I remain decidedly bearish, and will be so for some time to come as I consider the fact that from the beginning of the crash in Sept., ‘29 in the Great Depression to the bottom in 1934 it took three-and-a-half years. If this is similar, that would place the bottom in mid-2010.
Beyond that, my greatest concern as a native-born U.S. citizen is the monstrous Federal Debt being added to daily by the billions that it can never be paid off, even in the lifetimes of my grandchildren and great-grandchildren. You can’t solve a credit problem by borrowing more and more money, and you can’t maintain a stable economy by printing money and ultimately causing hyper-inflation. The cause of all our problems to begin with, with all its economic meddling and mismanagement, is the Federal Government and they are doing nothing but exacerbating the problem.
I will appreciate comments and arguments with my position in case I have overlooked anything or need to expand my thinking.
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