Two weeks ago, when the Dow had fallen about 1000 points, I said that the Dow Jones at 13,099 should see a rest. I expected at least two flat weeks and we had them within less than 1%. As I write this the Dow is at 12,930.24 (0.98% lower than the 13,099 I detected as a possible stop for the fall).
Barring a surprise move from the Federal Reserve next week, the next meaningful movement for the Dow should be below 12,5000 (about 4% down from here). The Federal Reserve will intervene to protect America’s economy in times of war.
As I mentioned in October 1st, I am expecting the Dow to double its price in dollars in the next 2 years. I also expect that to be an inflationary move, not sustainable and based on the feedback mechanism that feeds all inflationary human activities. Basically, a bubble. After that bubble, we should see real economic trouble.
Theoretically, as the value of the dollar tends to 0, the amount of dollars needed to sustain economic activity tends to infinite. At a given point in that process we will face the mathematical impossibility of having a large enough number of dollars.
The dollar should get a bigger hit. US companies should benefit in the short term and the gap between imports and exports should narrow. This will be touted as a “renaissance” of the American industry. This may be based on a model similar to that of the machiladoras in Mexico, where workers with minimal training ensemble products with parts manufactured somewhere else. Expect more American products with parts manufactured abroad (no matter how low the dollar falls, it is hard to beat 0 cost labor).
I am basing this predictions on mathematical models that predict most probable outcomes based on a series of simple rules that create complex patterns. This is not financial advise, only philosophical discovery. I am sharing my observations as I advance in the development of the system (after all, this is a blog).
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 23, 2007