View Full Version : The DOW - V
The DOW didn't like some of the news today.
http://moneycentral.msn.com/detail/stock_quote?ipage=qdi&Symbol=%24INDU
Down around 200 for most of the day.
So will it close above or below 10,000 on Friday? A little profit taking today with some bargin hunting in the AM?
Chart Link (http://stockcharts.com/h-sc/ui?s=$INDU&p=D&b=5&g=0&id=p36586152006&a=190456869)
Take a look at the chart - and at the comments on the chart.
This suggests that we are seeing the end to a bear market rally. This downmove could easily test 7286. If it goes below that, we are likely to experience the greater depression. I use that term as an accurate descriptive, without hyperbole.
Our problem is not the news today. Take a look at the news since the high on Jan. 19th. The media have been full of spin that suggested good news. When rallies end on good news, it's a bad sign.
I respectfully suggest that we should prepare ourselves, mentally and otherwise, for an extended period of financial challenge. Pay particular attention to state and city governments as the squeeze between tax revenues and spending gets tighter. Also, keep an eye on pensions, both public and private. Those are the ticking time bombs that are wired to the supports of the skyscraper we live in. Should they detonate - and I expect they will - there is (in my opinion) a risk to the structure itself.
Jest: I wonder if one of the QP's in foreign lands would consider hiring me as a butler? :D
THe media may have been full of good-news spin... but any real person that I have ever talked to hasn't been so cheerful.
I just don't see the real-life, tangible, positives to go along with all the good news.
And today Gibbs blames Bush - again.
Bush's fault
Some contend that the bond market is more sophisticated than the stock market.
Let's look at chart of a junk bond ETF: LINK (http://stockcharts.com/h-sc/ui?s=JNK&p=D&b=5&g=0&id=p53235163438&a=180001517)
It looks to me as if junk bond values are headed down. Could it be that there is a perception that the underlying economy is getting weaker, hence reducing the likelihood that lower-rated bonds will be paid in full and on time?
By the way - when the 20 day exponential moving average (EMA) goes below the 50 day simple moving average (SMA), some chartists call it a "death cross". With a name like that, there isn't much need to suggest it implies a substantial decline.
Some contend that the bond market is more sophisticated than the stock market.
nmap,
Why ?
Just curious...
nmap,
Why ?
Just curious...
Two reasons - size and leverage. Maybe a third one as well...
First, in terms of size, the bond market is about twice as large as the stock market - about 31 trillion USD vs. 15 trillion.
Second, leverage. Margin on stocks is 50%, whereas bonds are about 30%. Treasuries are 5-10%. Link for more info on margin (http://www.tdameritrade.com/forms/AMTD086.pdf)
The third item is the derivatives market - much (but not all!) based on debt securities. How big is that? No one really knows, since it is largely unregulated - but $600 trillion is mentioned. LINK (http://www.newsweek.com/id/164591). These include things like CDS (credit default swaps), which AIG lost billions of taxpayer money on.
In addition, many of the financial engineering products are based on bonds - things like the CMOs (Collateralized Mortgage Obligations).
Finally, governments from Greece to San Antonio issue debt - and little issues can affect the value of that debt.
Bonds are not just a buy-and-hold income choice. They can represent a challenge suitable for a riverboat gambler. ;)
Thank you, nmap.
Educational, as always.
By the way - when the 20 day exponential moving average (EMA) goes below the 50 day simple moving average (SMA), some chartists call it a "death cross". With a name like that, there isn't much need to suggest it implies a substantial decline.
FWIW, I just came across an entry/article on the stockcharts.com blogs that discuss this very concept as well as touching on indicators such as MACD, RSI, and Volume. What's neat for people like me who need lots of pictures to understand even simple concepts is that the discussion is kept simple and features annotated current charts of $SPX (S&P Large Cap Index) and $COMPQ (Nasdaq Composite) to go allong with the text.
Goto: http://blogs.stockcharts.com/ Scroll down until you get to the Feb 6, 2010 entry "Who dat gonna get dem bears"
No new information than has been shared on the "Economy be prepared for the worst" thread, but I find it helpful to hear/see the same things multiple times with fresh examples.
I came across an interesting source of info on the markets...
http://www.ritholtz.com/blog/
Written by Barry Ritholtz, who has been in the news of late. Apparently, something of a heavy hitter. Called the turns - both the big down move, and the turn up back in Mar. 2009.
Bearish on stocks, and on housing.
Here's a link to his views on housing: LINK (http://www.ritholtz.com/blog/2010/06/are-home-prices-too-high-or-too-low/)
Opinion: I suspect we're going into an extended period of downward markets and a challenging economy. Knowledge may help us get through to easier times.