The corrective stock market rally continued into Monday with targets of 50% of the decline from the highs. The Dow hitting 12,350 on Monday and the FTSE enjoying a morning rally on Tuesday to just shy of 6280. Tuesday evenings article - The Corrective Rally is over as the Stock Markets tumble on more Subprime bad news Summarised targets for the current down leg as follows -

FTSE 100
The FTSE 100 is targeting 6000, there is a strong probability of the FTSE holding 6000 (5990 low). Further downside appears limited in the immediate down swing.

Dow Jones
Dow Jones is targeting a down swing to between 11,650 and 11,750.

The FTSE performed right on cue, falling and hitting 6000 and then bouncing exactly as expected. The Dow Jones did decline below the previous lows, but then rebounded above 12,000 to end the week at 12,110.

The expectation still remains for the down leg to continue with further weakness expected especially in the Dow Jones towards its target of 11,750. For the FTSE I will be looking to see if it is able to stablise above 6000, even if new lows for the move are seen in the Dow Jones. However should 6000 fail, the FTSE is heavily supported in the region 6000 to 5900 so downside appears very limited at the moment.

Looking further out, the action to date, increasingly does not signify an imminent crash, so once the bottoms have been confirmed the stock markets could stage a strong rally into April.

Back to the week that was -

Gold and Silver continued to be weak, but the gold bulls remain positive on its longer term outlook on the basis of fundamentals of a weak US dollar and excess liquidity and the bursting of the US housing bubble .Stock Market Bounce looks like a Bear Trap, Gold Thoughts . , Subprime mortgage companies continuing collapse to benefit Gold stocks , Gold Forecast - Viewing Pullback in Gold as a Buying Opportunity - Global Watch

The sell off in the financial markets was blamed on Unwinding of the Yen Carry Trade, Unravels Global Stock Markets with any tighten in Japan expected to lead to more stock market falls, Forex Forecast - US Retail Sales Weakness means more Unwinding in the Yen Carry Trade . , World Liquidity Crisis Emerging as the Yen Carry Trade Unravels

For uranium bulls, news of ' New Uranium Mine Flood Tightens Uranium Supply - Prices to go Higher ' With $100 just around the corner.

The US housing market's subprime problems remain, and expected to worsen in the coming months, where with each passing week the probability of a US recession increases. This outlook was analysed in several articles during the week two articles of particular note are - US Housing recession increasing risks of US Economic recession as growth continues to slow , Mortgage Foreclosures and Housing Bust to result in US Interest Rate Cuts

Make sure to visit the site regularly for the latest analysis on the direction of the stock market this coming week, especially as more action to the downside is expected.

Profitable investing & trading for the coming week.

By Nadeem Walayat
Editor, The Market Oracle

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