Nine Reasons for Dow 6000 18 comments
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1. Gapping lower: Not only did the market gap lower on Tuesday, the action occurred on another day of surging volume. As the global economy continues to erode, look for the world indices to usher in further gap-downs in the U.S. European banks, with their $1.7 trillion in outstanding loans to Eastern Europe, could indeed be the next shoe to fall.
2. No up-trends in any Dow stock: International Business Machines (IBM) is the only Dow Jones Industrial stock that has remained in an uptrend since the November lows.
3. Oil: With Oil on its way to the $20s in the next few months, former safe haven plays such as Exxon Mobil Corporation (XOM) will continue to decline. A look at XOM’s chart reveals a break of support below the 50-day simple moving average (SMA).
4. Stimulus plan: Most of President Obama’s stimulus plan spending does not happen until 2011! I was outraged when I found this out. Dow component, Caterpillar Inc. (CAT), is headed to the low $20s or the teens before this is all over, due to the lack of substantial infrastructure spending this year.
5. No support below November lows for the Dow: DJI 20-Year Chart .
6. Volatility Index ($VIX): As the Dow broke to new lows on Friday, the $VIX only closed up 2.22 to 49.30, illustrating that fear was not palpable in the markets. However, the November lows saw the $VIX close at a high of 81.48. Might an extreme bear market low see the $VIX hit $100?
7. Insider buying: Where is it? Dow Components, Alcoa Inc. (AA) and General Electric (GE), have been decimated yet management has not stepped in with any insider purchases of stock – disconcerting, isn’t it? After all, if they don’t see value in their stock, why should general market participants.
8. Markets overshoot. Just as the indexes overshot to the upside in the Dot.com melt-up, look for stocks to overshoot to the downside before this bear market is over.
9. Gold in the $1000s will be the new game in town the next few years. Look for a mania in Gold to develop as stocks are cast overboard by a panic-driven public in favor of the history’s currency of choice throughout the ages.
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i always seem to like the ones i agree with...
do you remember this time last year?...
people saying that there was no recession or that we were in danger of talking ourselves into one...
who would have thought that one of the shoes to drop was on bush hisself?...
i personally am surprised that stocks have held up this well...
big problems brewing with eastern europe...
double tops in SPX and DJI...
the bank is broken...do not pass go...do not collect 200...
I must admit I cannot get over all the fuss about nationalization.
Where equity has been wiped out, i.e. where companies are insolvent, investors are going to lose their money. That is just life. Whether Bernanke likes to talk about Formalized Nationalization or otherwise, if Uncle Sam put his money in, if the value is not there then you are going to lose your stake. Period.
On Feb 25 12:34 PM Dave Wrixon wrote:
> I think 6000 is a given. The question is: how far will it go? I thought
> 6000 would be the bottom, but I think 5000 or even 4000 is now quiet
> credible.
>
> I must admit I cannot get over all the fuss about nationalization.
>
>
> Where equity has been wiped out, i.e. where companies are insolvent,
> investors are going to lose their money. That is just life. Whether
> Bernanke likes to talk about Formalized Nationalization or otherwise,
> if Uncle Sam put his money in, if the value is not there then you
> are going to lose your stake. Period.
>
I think one has to be careful with statements such as "With Oil on its way to the $20s in the next few months" and "Gold in the $1000s will be the new game in town the next few years." Today's market action makes both statements seem even more suspect than they would otherwise appear to be on the surface. Finally, why do you insist on looking at the Dow, which is becoming increasingly unhinged from the market for many reasons listed previously at SA? If SPX 740 holds, you might also argue that the Dow's recent failure was bullishly nonconfirmed.
Driving season will likely rally this year given the poor economy for more extravagant trips. $20 oil is not likely.
Eastern Europe is what it is - not a big part of the world picture.
Entirely too much pessimism surrounding the markets - I think many, likely including the authors of such doom and gloom articles, take positions that stand to gain handsomely from prodding the bears. Unfortunate that they get such widespread press on their negative views.
Our current domestic economic policies are about everything that is needed to look into future equity market value. The shorter term trading patterns notwithstanding, markets will continue to follow trend. As the indexes reach new territory, and volatility rises, uncertainty and optimism will be cause for larger short term swings. As economic reality returns, along with acceptance, the trend will continue.
You see that the chart line would be at 5500 to 6000 now.
Perhaps all things human that are affected by innumerable and varied human influences while in process ultimately end where they always should have ended under natural law given sufficient time.
How far we go is anyones guess but, this element of the catastrophe appears to me to be the biggest contingent for market confidence.
Tyranny rarely stays in remission when economies decline. Minute Men around the world should begin to prepare.
Pray for the best, Prepare for the worst.
On Feb 26 01:39 AM constructe wrote:
> The biggest argument I can find for Dow 6,000 is: No return to Glass-Stegall
> and crooks like Stanford and Madoff are still languishing around
> with their purloined amenities while the citizens of this great nation
> suffer. The perception that there is mass corruption fits the reality.
> There is something rotting under the US financial market and no one
> is cleaning it up.
The market is searching very hard for clues. Look what happened when Guenther(the treasurer) gave a beat around the bush fiddle faddle word game speech about his bank plan which essentially gave you no information about the progress in prodding banks to start lending again. So the market wanted some clues, but got nothing and when it realized there was no trigger, it promptly pounded the DOW.
The market is very nervous right now because even though people believe the market's general direction is down, there is also the perception that any action by the government could trigger a big move, since the DOW has been hammered so bad already. People are more nervous than a monkey, so even though the DOW could go to 6000 it could also go to 8000 maybe even higher if their is some triggering event (and then could easily reverse itself again, in a matter of days!)
Another thing to watch is any decisions regarding short selling. The government could easily in the future decide to ban short selling, and if not, will probably reimplement the uptick rule with the perception (and probably rightly so) that the reduction of short momentum and short squeeze will make the market less volatile and hence more stable.
If you decide that indeed short selling will be banned(and how anyone could find this out, I don't have a clue) you should probably rush to gold(or maybe silver), because that will absolutely be the only way to make money in the market until the downtrend ends.
In short, the trend is down. But the volatility is insane, especially if there is a triggering event, which there very well may be soon! Here is one way you could straighten out the volatility:if you are a short term investor try this(and stay very alert!)Buy a short ETF (25 percent, and keep it until shorting is banned!) a gold ETF(25 percent). Then go long on 2 ETFs, perhaps an oil ETF(25 percent) and an Agriculture ETF(25 percent) Then if the market goes up, your oil and ag ETFs hopefully carry you, but if the market goes down your short and gold ETFs will protect you. Also, on the downside of extreme volatility, cover your short ETF and sell the gold. On the upside of extreme volatility, sell your oil ETF and ag ETF.
This is if you are a bold investor, if you are chicken just stay in cash until the news stops being so riduculously bad!