Summary for Week Ending 24th November 2007
The past two weeks has seen a deliberate progression towards the downside, with little or no respect for the technical support levels (thus far). This steady pace of decline is also not exhibiting any displays of panic either, as the market is imply just melting away. The next 'big' stopping pint will be the lower level of the parallel channel and after that will be the August low, although this is an obvious technical point and I personally don't hold much faith in a technical level of support or resistance that everyone can see. The market as a whole is rarely completely obvious.
The 90 day time line produced nothing and so we look at the next possibility which is 90 days from the high which will take us to early January, which is a long way off. Of special interest to me is the news that the banks will have to bring their 'mark to make believe' debt onto their balance sheets, most of which we can all imagine is totally worthless so I'm expecting to see some real blood in the water when they start reporting the true nature of the losses which are at present hidden from view. Will this exacerbate a bear trend, probably, but its too far into the future to start making any solid predictions, much better to look a what is happening now.
Looking ahead I cant see a reason for the market to make a sustained rally and reinvigorate the bull trend. It would appear that 2008 will be a tough ride for the US and as follows itwill infect everyone else, each to differing degrees. If the credit binge is over then we can only expect economic activity to slow which in turn means lower returns etc etc etc... it all looks bearish. If the chickens do not come home to roost on this cycle, then we could of course see a complete debt funded reversal. This is where things get hard. Common sense should play a part in the analysis, but only if everyone else is also using common sense, and recent history says this is not always the case. If the bears are growling, they can be relied upon to be very unpredictable (unlike the bulls which always seem orderly). If you think like I do, then cash looks a good option until things become clearer.
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