Predicting Market Behavior…Blindfolded! (Part 5)

03/06/2009 12:01 am EST

Focus: STRATEGIES

Timothy Morge

President, MarketGeometry.com

Many of you have probably guessed that this was a series of daily bars of the Dow Jones Industrial Index. This last chart shows the action through Friday, February 27, 2009. You can see I marked what I consider to be the probable path of price with a set of thick green lines.

chart

When I speak of the Dow falling to 5500, I can see the fear and shock in people’s eyes. At a recorded interview at the November 2007 Traders Expo, with the Dow right at the 13,000 area, I told Tim Bourquin of MoneyShow.com that my charts showed the Dow would likely break 7,500 within 18 months. Fifteen months later, we are closing just above the psychological 7,000 level on the Dow.

I know what I see in the charts I have presented here. I think it would be best for this country and the world economy for all of our worst fears to be realized quickly. The governments of the world should stop throwing good money after bad and let the Dow and other major indices fall until they find a sustainable level. And then I believe the stock markets around the world would begin a period of range trading, while investors slowly began examining stocks around the world for some signs of stability, and then for stocks that might be undervalued. This purging process is necessary—and once it happens, and once our worst fears are realized, the healing and rebuilding can begin.

My thoughts go out to all of you struggling in these difficult times.

Best,

Timothy Morge

timmorge@gmail.com
www.medianline.com
www.marketgeometry.com

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