Friday, October 24, 2008
A METEORITE THROUGH THIN ICE?
As I write this early in the morning in Florida, world stock markets have plummeted overnight, and it looks as if it will be the same in the U.S. -- at least at the opening.
I am not an investment advisor, and anything I write about stock markets is strictly for my own amusement and the entertainment of my readers. I do not suggest that you act on what I say.
I rely on a “technical” approach involving charts based on price and volume, and on various technical indicators, especially the MACD and the William%R.
It looks as if the U.S. market will plunge in panic selling this morning, which could be so extreme that it will lead soon to a “reversal” day, followed by a strong bounce up in prices.
The most likely level for the Dow Jones Industrial Average to find temporary support is around its low point of 2001-2002 -- about 7100. It closed yesterday (October 23) at 8691.
For the S&P 500 the support level is around 770. It closed yesterday at 908.
The rebound will not necessarily mean that we've seen the bottom of this bear market, but it could mean a vigorous rise in prices for awhile – probably setting an even bigger bear trap than the one I pointed out a few days ago.
Of course stock prices could go straight on down through those support levels like a hot meteorite through thin ice, but if so, don't despair. No matter what happens to stocks and banks, we'll always have plenty of politicians!