DAILY REPORT (11/13/08)
Where's Barton Biggs when you need him? Two weeks ago Mr. Biggs called a bottom to the Dow and was on Bloomberg and CNN, so much that he must have slept in the studio. He especially loved the financial stocks. Well Mr. Biggs, if you loved them at 9,000 you should hit nirvana by the time the market gets to 7,287! I know it's way too early to get excited and nothing is sure until you see the close, but the Dow continues to move lower. Right now (at 2:15 pm EST) the December Dow futures contract is down 252 points at 8,385 and that is yet another lower intraday low, and only 240 points from retesting the strong support at 8,146. This will be the third test. Considering that five sessions ago we posted an intraday high of 9,635, that's a pretty good haircut. Again, I'll repeat this for anyone who is just tuning in: I don't care which way the market goes as long as I am on the right side. The market has been saying for many months that short is the right side.
With today's decline, you can see on the daily chart below that the Dow has now broken down from the compressed trading range that has existed
for more than five weeks now, and I believe the breakdown is significant. It will mark the third test of good support at 8,146 as well as the beginning of a leg down to the 2002 low at 7,286. I am not the only one who sees much lower levels; the Point & Figure chart for the Dow deals only with price and projects a bearish price target of 7,600 and that is not all that far away
from my own target. Likewise, I see similar weakness across the board in all major indexes as RSI, MACD, and the histogram are all turning down and they are all breaking down as is the Dow. The Transportation Index is no exception to the rule as its Point & Figure chart also has a bearish price target of 3,100 which would be a new low for the entire move down:
Some people still hold out hope that the October 27th low was the low, but I think they are in for a rude awakening. I also openly question whether or not the 2002 low will hold, but I do believe that once a low is in we'll see our first significant rally (lasting 30 to 90 days) in quite some time. Unfortunately, we seem to be quite a ways away from that bottom.
I am convinced that we are running amuck in stupidity! There is discussion of bailing out the automakers to the tune of US $55 billion and, not one but two stimulus packages by both Bush and Obama. The first one may run as high as US $450 billion. It seems that we have a complete absence of intelligence in Washington, because if anyone had half a brain, they would know that it won't work. Nothing Washington has done works and yet they keep on doing the same stupid things! It has to be by design and I really wonder what the true agenda is? All the government has done over the years is build distortion after distortion into the system, and that in turn insures that the true problems grow exponentially. That's where we are today, with problems so big that no decent alternatives are at our disposal. Here is a perfect example, the banking sector:
With all the hundreds of billions of dollars the government has thrown at several large institutions, has done nothing to help the plight of the average American and, surprisingly, it has done nothing to help the banks. After all the declines, the Banking Index still has a bearish price target of 35. When good old Barton Biggs recommended the banking sector, this index was at 57.50.
In conclusion, the cash Dow is now down 350 points at 8340 (its 3:15 pm EST) and I have to wonder what is going on. I am not a conspiracy nut, but it's hard not to think that all of this is deliberate. If that is true, then someone has something to gain from all the misery, and I would love to know what it is. Maybe it's just part of the American culture, because it sure as hell seems like they're all clueless, or maybe they just don't give a damn. It's a mystery wrapped in an enigma.
Finally, I know I almost never talk about the NASDAQ, but a look at the daily chart below shows that it closed below its October 27th low today as
it closed down 81.69 and below 1500 at 1,499. I do not think the NASDAQ will be an exception and I look for all the other major indexes to do the same thing over the coming days. I suspect that today was yet another 90% down day, and just another sign that sellers have yet to exhaust their desire to exit stocks.
ebo@dtanalysis.com
Dow Theory Analysis SAC
November 13, 2008
Email this Article to a Friend 
Printer Friendly Version
