Is This the Moment of Truth?

Susan wrote:

I read in several places that we face a "moment of truth" in the market right now. I thought that was back at the March lows when the financial system didn't melt away and smart investors (like your readers!) bought. Why are we facing a moment of truth now?

Most talk now about a moment of truth is coming from technicians, that is, investors who analyze charts to determine the odds of future direction.

They will tell you that the S&P 500 is currently caught between two key levels: support at 1,400 and resistance at 1,425. A week ago, they referred to 1,400 as resistance, but the market pushed through that last Thursday, so the former resistance became support.

Another way of analyzing the market examines its percentage position above or below its respective low and high. Right now, the Wilshire 5000 (the broadest measure of U.S. stocks) is parked just below the level representing a 50% retracement of its decline from the October high. It fell 19% from its October high to its March low, and since that March low it has gained 11%. If it gains another 11%, it'll be right back at its October high.

So, the idea with this being a moment of truth is that the market's direction in the next few days will determine its fate for the next month or so.

However, I wouldn't put too much stock in this idea, so to speak. I don't think I've ever spent a day researching stocks when I didn't run into somebody saying "we'll know more tomorrow" or "this is the decision point" or here we are at the "moment of truth." Isn't it always a moment of truth of some sort? The evidence is in, we all have an opinion, then we step back to see what really happens.

Generally speaking, there are five moments of truth in every trading week. They come on Monday, Tuesday, Wednesday, Thursday, and Friday.

Comments

[bluesmoke]

If we, as a country, don't wake up to the fact that we are losing our economic position as a leader in the global marketplace, and don't work together to do something about it soon, then the world as we know it will change forever. The problems are well-known and too lengthy to list here.

[gordon]

This market is being held up by the investment banks, made available by Paulson's Plunge "Working Group" at least $350 Billion so far in funds borrowed @ 2.25%, they are buying SPY & DIA futures with this money. Mutual fund inflows from ordinary Americans are down, so is foreign investment in equities. This is how I explain the buying in SPY on every attempted selloff, just look at David Fry's charts. They are pledged to not let the market fall "on Bush's watch". This interference makes it a crapshoot, imo.

[galewhitaker]

Skyrocketing oil prices might make today a turning point in the market. The worlds greatest analyst (Marty Chanard) says that these are dangerous times for the bulls. If you want to know why you can subscribe to his web site at stocktiming.com .

[sivere]

The truth is that we need to

TakeBackTheFed.com

[globalmacro]

Very good point. I think part of this pyschology is really built on the encouragement of people like the CNBC folks whose business depends on you and I thinking that something important is happening at every moment.

[DaveW]

Sivere,
It's great that you have an opinion and want to share, but how about NOT posting the same old crap advertisement to nearly every article on SA?!?