The long process of waiting for a bottom to form in the stock market has begun. The days of limitless spending and ridiculous notions of second and third homes, Cadillac escalates and showing your 'bling' have passed and the days of belt tightening, rationing and evictions are now here.
Regardless of the long term implications for our society, we must now take the time to clean up the mess George Bush's policies have created. From a traders perspective, we may be in a long holding period with regard to US equities as doubt has been cast on the 'American' model of capitalism. Ironically, it will only be after a large majority of our population swears never to buy another stock again, can we realistically begin to believe some sort of 'bottom' is in.
As for what is happening today, stock prices are still under quite a bit of pressure. As the today's chart illustrates, there are three significant technical barriers to rallies going forward (The gap at 109.68, the 13 EMA at 111 and the bottom of the trend channel at or near 115). These hurdles will need to be cleared before any rally can resume in earnest. My hunch is that they will pose too much of a challenge for the time being.
For the mean time, we remain flat with regard to positions. After being short and having our down side targets hit, one ought to sit on the sidelines with a nice pile of 'dry powder' and continue to wait for some sort of bullish tone to re-emerge. Yes we should get some sort of seasonal bounce into the spring, but that is the spring and we are just now heading into the winter.
That's all for this week,
Brian Beamish FCSI
the_rational_investor@yahoo.com
the-rational-investor.com
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