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Stock Market to Drop Another 11 to 12%?
By Geoff Green | January 12, 2008
The stock market delivered another significant blow to shareholder value today with stock prices falling at the open and continuing to fall throughout the day.
Positions we entered into yesterday fell about 1/3 of the percentage drop of the indexes and are down about 0.5%. Subscribers should visit the Current Stock Market Recommendation area for suggestions on how to handle the current market environment.
Here is an overview of what the market seems to be forecasting. Click the chart at the bottom of this page to follow the discussion. (Note - I’m trying a new chart service - let me know if you like it).
The chart seems to be showing a descending triangle which is bearish and shows distribution of shares. The bottom of the triangle appears to be at 14,200 and the first drop below that support level was on Tuesday.
So in essence we had a two day rally back to resistance and then todays action which was firmly bearish. Today’s action could also can be interpreted as a “belt-hold” or bearish “engulfing pattern”.
If you are familiar with candlestick interpretation you’ll also recognize the last few days to be bearish reversals.
Big deal you say - sounds like a bunch of hooey to me! What does it mean?
Well as you know I don’t like to predict but I’ll stick my neck out here…
Based on this analysis I believe the stock market value as indicated by the Wilshire 5000 will reach the mid 12,000 level before this “correction” has a solid chance of returning to a bullish trend.
That’s another 11 to 12% drop on top of the drop we’ve already had since October 2007!
However, things can certainly change and I could be wrong, however, consider these issues for starters…
- Homebuilders are in serious financial trouble and the rest of the home sales market (a huge driver for the rest of the economy) is on the ropes.
- Predictions for home sale improvement keep getting postponed - not by months, by years!
- Countrywide was just saved from bankruptcy by Bank of America - which picked up several trillion dollars in loans for just $7 a share.
- Fed Chairman Bernanke seems powerless to solve the credit and liquidity issues that are plaguing the economy.
- Because of our inept government (see above item), major financial institutions are going overseas for bailout money - OTHER COUNTRIES!!! - eh gads!
- Merril Lynch is rumored to be readying an earnings report that shows a $15 Billion loss - $15 BILLION! - will they have to go to China too!
- Consumer confidence is at an all time low mostly based on the jobs outlook.
- Gold futures just hit an all time high of $900 an ounce.
I could go on, I won’t, I’m sure you get the message.
So for investors is the news all bad? Certainly not.
We stuck our toes in the water this week and found it to be extremely cold. We’ll be out on modified stops next week or the market will take off - hey, it could happen!
If the market continues the downtrend to the mid 12000’s we’ll be taking advantage of proven rallies and shorting opportunities.
Take advantage of our free subscription period and come along for the ride, it’s gonna be a blast!
Topics: Daily Commentary, End of Week Commentary, Federal Reserve, bearish, stock market recommendations, stock market strategy |
One Response to “Stock Market to Drop Another 11 to 12%?”
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March 10th, 2008 at 12:10 am
[…] It remains to be seen if these levels will help the stock market find a bottom. Even thought we reached the 12,500 level as an intraday low in January you can read this post to see why a price drop to this level on a closing basis is a distinct possibility. […]