This earnings season is crucial in turning Corporate America from losses to small profit.

Last Q3 2009, they still lost 15% YOY, QxQ.

If they turn the ship around in Q4 2009, then we could have a vertical rally that is sorely missing from early August to Nov 2, 2009. From Nov 2, 2009, we have a tentative rally but still weak and hesitant, not a vertical rally that can reverse the bearish momentum on the monthly chart for Dow Jones and SnP500.

As of now, the US is considered to be losing it’s economic power and is destined to wallow in recessions for years or decades to come.

A vertical rally that hopefully goes into and above SnP 1230 is going to change the perception about the United States not only in the US but all over the world.

Then we can have the start of an American Economic Revival instead of the current Doom and Gloomer environment.

From early August to November 2, 2009; volume went down during rips and went up during dips, that was a sign of corrective pattern even though the markets kept making stair step higher highs and higher lows.

From Nove, 2009; SnP was able to make a rally into 1116 without suffering a dip selloff but instead consolidated the gains into a shallow correction range with a low side of 1086. The christmas rally up to last week is expected to result again into another shallow consolidation range before the next minor rally to happen. Then we go into a big correction that can last a year or two. A prolonged correction can result in a minor to major recession into 2010 right after the Great Recession of late 2008 to early 2009.

Watch out for trading volume to start rising as price goes up. That will be the sign of an impending vertical rally.

If Dow Jones and SnP refused to undergo another consolidation range or a selloff in the next 2 to 3 weeks; then we can be in for a vertical rally that can push SnP above 1230. That in turn will create a positive momentum that will have a much greater chance for SnP to be able to go for 1270 or even the 1300’s.

Hope for the best and prepare for the worse.

American Economic Revival is what we need to encourage people into positive action and pull them out of this Doom and Gloomer environment.

- john

Related Posts:

• Caution: This is not going to “recover” like any recession you have lived through!
• Earnings season for the US has barely just begun.
• Rallies will create corrections. And corrections will create rallies.
• 2010 will make 2008 and 2009 look like a cake-walk.
• The U.S. is in a very bad position!!!

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