Tuesday, October 14, 2008

After the crash...

Since we officially crashed into Friday (and subsequently rallied almost 2,000 Dow points), now what?

I will have more comments in future days, but for now, it is wait and see. The 11% rally on Monday is actually typical of a bear market rally, but given the fact that we took off 45% in 1 year (and 18% in 1 week), a substantial bear market rally or even a new bull market can not be ruled out. I will wait for volume to pick up, leaders to show up, and selling (forced liquidation) to dry up, among other things.

For the time being, I will wait and see. My gut tells me that the lows of this bear have not been made yet, but I are trying to open minded here. There is still a lot of near-term risk here and a retest of Friday's low is likely over the next few weeks or months. Any substantial take out of those lows would likely lead to a test of the 2002 lows. If those lows are taken out, another crash (THE crash?) would likely ensue...

1 comment:

Anonymous said...

the liquidity injection may not be enough if we consider the fact that housing bubble still has to deflate, what about the credit card default issues

At some point, we might want to ask these banks if they're willing to loan money to a population that is already over extended and if they're willing to loan money to businesses that have no place to sell their products or services.

What the government is doing right now is like handing more pot to a crack addict .....any thoughts

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