Sunday, February 22, 2009

Dow Jones for the end of the year?

Check out the link above!

I was considering the argument that there will be stabilization/recovery at the end of 2009. On a fundamental analysis, that is probably the most ridiculous thing Ive ever heard, however for some Dow theorist the bullish argument does hold some weight. Look at the chart in the link posted above. I was actually looking at the same exact chart earlier in the day before that blog post came out. I was thinking the same exact thing! Considering long term support, maybe the end of the year will see bounce off support. However, as I have been studying the ways of a historian recently, Ive decided to back test all the way back to the great depression on the Dow. A few things popped into mind as to why the bullish scenario won't pan out.

Bearish Reasons:

1. The financial markets in late 20's and early 30's were not as complex as ours. Our current crisis has many more systemic problems that the great depression could have had.

2. Based off the Dow chart, prior to June 1929 up up until September 1929 you have a bullish trend followed by an approximate 3 year period of a downward trend. If this recession is just as bad as the depression then we will should see 2009 as a another year where Dow will continue its slide.

3. Fundamental considering the job markets, investment, housing etc... all fundamentals are still crap... enough said about that point.

4. Sentiment is still uncertain, I have no source for this, but I know a few money mangers who are still all on cash positions waiting for things to be a bit clear before actually investing in anything.

Bearish Counter Arguments:

1. This Great Depression Comparison is not relevant as monetary policy is more advance and fiscal policy (stimulus packages will work...) ...

my response to that=> I think that monetary policy has been crap for 2008, though I do not fully understand Bernake's strategy of keeping rates so low as to spur something (though i recently bought a book on the great depression, will get back to you guys on that later). Last time that happened, the last president of the Fed Reserve (Greenspan) took lots of crap for causing this current recession. Fiscal policy.... look at whose had organzied the past past stimulus plan... a president of a failed oil company, a secretary of treasury who experience were in investment banking!? ... how about getting someone to work on a plan who actually understand how markets work... Lets hope Obama will be a better manager...

2. Mid term support from 1997 to 2009.

my response => I think the author of the link above tried to use volume as a indicator for a bullish argument as he circled it. I always thought that a large spike in volume followed by peaking off volume trends showed continuation of the current trend. Hence support could possibly not hold.


Overall I am still bearish for the year. In terms of the Dow. Usually I don't like to consider the Dow do its price weighted nature and its tiny constituents list. However since its been tossed around in the media so much, people watching the Dow might actually affect, so why not talk about it.


Stay tuned:

My next blog should be on growth prospects and where it will be coming from... The United states or Asia... who will be leading the recovery...

until then... Happy Blogging!

No comments:

Post a Comment

This Blog has been developed by Analyze Capital LLC, and as an independent organization we provide “AS IS” information without warranty. The ideas and opinions expressed by the contributers of this blog are personal and do not represent the actions or policies of Analyze Capital LLC. The contents of this blog do not intend to assert recommendations or to offer advice of any kind. We are not responsible the consequences, be they gains or losses, that may result from using any of the information from this blog.