Financial Markets Analysis: Stocks Bear Market and Government Intervention
Stock-Markets / Stocks Bear Market Feb 14, 2009 - 06:43 PM GMTBy: Nadeem_Walayat
The weeks stock market trend was in one word WEAK, the preceding weeks strong close FAILED to have any follow through, the stock market FAILED to break above 8,400 let alone make it to resistance at 8,600, stocks turned lower to target the lower end of the trading range of between 8,400 and 7,800, including a BEARISH break below support, which triggered the Plunge Protection Team (PPT) into action to support the stock market and bring the selling to a halt, for the time being at least.
Where Next ?
As I mentioned last week , we are in a stocks bear market that is targeting fresh lows with a target as of 20th January of 6,600 on the DJIA, and 3,400 on the FTSE 100.
The battle being waged is that of debt deleveraging and economic contraction against ever more desperate government interventions that are increasingly buying up anything and everything in an attempt to plug holes in the bursting deflationary dam. Therefore short-term stock trends are subject to government intervention warping chart price action i.e. generating false triggers that can catch traders out.
The seasonal trend is for a rally into late April / early May, there was limited evidence for this the week before, however the weeks trend hit a brick wall as the bear market has attempted to reassert itself. Therefore my analysis suggests that next week will continue to see this battle being played out between the bear trend against seasonal tendencies coupled with government intervention, eventually the governments will lose as the bear trend reasserts itself as there is plenty of time for the bear trend to unfold, if anything the weeks weakness suggests that the lower target of 6,000 is now becoming more probable.
In conclusion the stocks bear market continues to target DJIA between 6,600 and 6,000 by July 2009. The short-term trend is exhibiting much volatility. Its a tough call but I would not be surprised if stocks closed higher next week inline with seasonal pressures, in which regard one would look to oversold banking stocks / financials to lead the market higher. II am expecting stocks to be contained within the trading range of between 8,400 and 7,700 for another week, with trend targeting immediate resistance at 8,300. A break below 7,700 would negate this short-term corrective scenario.
Financial Armageddon..... Postponed?
2 minutes and 20 seconds into this C-Span video clip, Rep. Paul Kanjorski of Pennsylvania explains how the Federal Reserve told Congress members about a "tremendous draw-down of money market accounts in the United States, to the tune of $550 billion dollars." According to Kanjorski, this electronic transfer occurred over the period of an hour and threatened a further $5 trillion to be drawn out triggering a total collapse of the Worlds Financial System, which then prompted Hank Paulson's emergency $700 billion TARP bailout action.
Video Served by Youtube
Following Septembers close call with Financial Armageddon the governments of the world have been busy recapitalising bankrupt banks with tax payers monies, however the $500 trillion derivatives monster continues to deleverage and thereby implying that the risks of financial armageddon have only marginally improved on September 2008. There still exists the high potential risk of financial and economic collapse that would be accompanied by eye-wateringly extreme currency market volatility and probable seizure.
For more on the impact of deflation, download the world's foremost expert on and proponent of the deflationary scenario, Robert Prechter's FREE 60-page Deflation Survival eBook or browse various deflation topics like those below :
- What happens during deflation?
- Why is deflation bad?
- Effects of deflation
- Deflationary spiral
- And much more in Prechter's FREE Deflation Survival Guide.
Your stock index futures trading analyst.
Nadeem Walayat
Editor, The Market Oracle
http://www.marketoracle.co.uk
Copyright © 2005-09 Marketoracle.co.uk (Market Oracle Ltd). All rights reserved.
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By Nadeem Walayat
http://www.marketoracle.co.uk
Copyright © 2005-09 Marketoracle.co.uk (Market Oracle Ltd). All rights reserved.
Nadeem Walayat has over 20 years experience of trading derivatives, portfolio management and analysing the financial markets, including one of few who both anticipated and Beat the 1987 Crash. Nadeem's forward looking analysis specialises on the housing market and interest rates. Nadeem is the Editor of The Market Oracle, a FREE Daily Financial Markets Analysis & Forecasting online publication. We present in-depth analysis from over 250 experienced analysts on a range of views of the probable direction of the financial markets. Thus enabling our readers to arrive at an informed opinion on future market direction. http://www.marketoracle.co.uk
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