Last Friday I wrote that the Dow Jones at 13,099 should see a rest. I pointed out that some statistical barriers had been broken, and that the fall should stop around there. I was wrong by 0.6%, but not much more. And then, on Tuesday, we had this huge run rally of some 300 points. I did not expect it, I must confess. I announced and expected a flat week. And then, the Dow lost most of the rally gains between Wednesday and Thursday. What a weird way to go flat…
As I write this on Thursday, the Dow is at 13,110. Barring a surprise government move (rate cut, or any other measure to inject liquidity into the markets) the next meaningful move should be down to re-test September lows. Next week is Thanksgiving Week in the US so I would expect more flat (“volatilely” flat perhaps?) markets until after Black Friday, which may bring or not bad news from retailers.
If the retailers’ news is good it will be due to the injection of liquidity into society through credit card debt (I am preparing an article about it, but the gist of it is that today it is cheaper to get a 2 year or even a 3 year credit for $10,000 than to work to earn that amount), which will be taken as good news but will mean only bad news down the road.
If the news is bad, the Fed will feel justified in declaring that the risk of a recession is higher than the risk of inflation, and lower the rates a little bit more. Either way, at this , the end will be the same. There is only one way to solve this situation, and it is the immediate withdrawal from Iraq, which is eating our economy away much in the same manner as the Vietnam War did, and the Afghanistan invasion did with the Soviet economy.
This article is part of the series "Exercise in Market Timing"
- Expect increased volatility
- And we got increased volatility
- Bad News For the Dow (Short Term Bear Fest)
- Dow Jones 400 to 600 more points of pain
- After exiting two weeks the Dow Jones goes nowhere
- Dow Jones at 13,300.02
- Dow Jones at 13,099 should see a rest
- Dow Jones Finds A Convoluted Way to Do Nothing
- Dow Jones Ready for Next Leg Down
- Dow Jones 13,252. Not All Clear Yet
- Dow Jones: Announced 2-day Pullback Over
- Timing The October High And November Bottom Of Dow Jones
Franklin @ November 15, 2007