In what looks to be a classic parabolic move (inverted in this case) world equity markets are all pretty much moving in unison to the downside. (usually when all the equity markets move in the same direction at the same time it is a good indication we are nearing a proverbial bottom). Another great contrarian sign, Warren Buffet announced (through Birshire Hathaway) he would make a $5 billion dollar investment in Goldman Saches. Ever the horse trader, Buffet recieved an additional $400 million dollars worth of warrants at on GS $115. In my seminars and presentations I often make reference to Buffets classic market axium: Sell when others are buying and to buy only when others are selling. Indeed this appears to be the case once again. Hats off to the oracle of Ohmaha. Now all we need if for one of the major US newspapers or periodicals to come out with a cover story on the stock markets' poor performance and we will know the bottom is in!
Ok, now for the chart. From a technical perspective, we were given yet another sell signal on the SPY when it moved through the important low of $120 just two weeks ago. The bear flag pole formation confirmed with this move suggests prices want to move down to the $108 level. My hunch is we move down in some great climactic spike. This is the month to do it too! October often hands the market some stunning one or two day losses. The bottom of the downward pointing channel (that has dominated this bear move) currently sits near $115 and ought to be supportive in the short term. But if broken, look for another gut wrenching drop.
With regard to purchases of US shares; Until the dust settles from the staggering $700 billion dollar bailout package in front of the US Congress, I can't see any 'buy' signal coming in.
Keep those seat belts fastened, we ain't done yet
That's all for this week,
Brian Beamish FCSI
the_rational_investor@yahoo.com
the-rational-investor.com
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