Stalking Major Moves: Looking for Signs of Where the Market is Headed (Part 5)

10/17/2008 12:01 am EST


Timothy Morge


Let’s look at the chart that I just finished updating on October 10, 2008, as I began to write this article:


The Dow continued its downside behavior, making lower highs and lower lows. And in the past ten trading days, the ranges have widened, and the sell off has intensified. There have been more bailouts, more failures, and a package put together by the United States Government—and the Dow continues to the down side.

You can see by the Energy Points I circled on the current chart just where the Dow may go. There may be a good selling opportunity if the Dow rallies soon around the 9600-9700 area. The down side targets that are most likely to be meaningful are at a re-test of the 7300 area, if price can slow its descent, and then congest a bit before falling. There’s another Energy Point at the 6300 area that is also a good candidate to be a price attractor. And obviously, there are areas below the 6300 level that the chart shows as possible targets; in short, the Dow and the United States economy are in dire trouble.

As I told Tim during the September interview, I hate to sound so negative on the United States economy, and our stock market. But we are facing high inflation [in my opinion, inflation is currently running at 17-20 percent and the recent sell off in the US Bond and Note market may be reflecting that], and are on the brink of a 1930’s type depression. Our elected officials do not have a plan—in fact, in my opinion, only solving the inflation problem, and then the passing of time will allow the Dow, as well as housing prices, to begin any significant rally, although from significantly lower levels.

Where will the Dow and housing prices be when the bottom is finally in? I am a trader, not a forecaster. I’ll look for a sign of behavior, and I’ll be one of the happiest persons in the United States when I see signs that a major bottom has form—because I have been so negative for so long. But until our leaders give the economy the medicine, the sickness will continue.

Paul Volcker, where are you when we need you?

I wish you all good trading.

Timothy Morge

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