Sunday, March 09, 2008

More Downside Ahead

Top Line: Friday's action managed to be a solid break that should mean the down move will continue for at least a while. The final tally was not as bad as it had been during the afternoon but the position in still in good shape for a drop.

The jobs' report was poor and generated several pronouncements that the US economy is in a recession. Of course, the Official deciders have to wait to Confirm it with live numbers. The point is that the world is coming to realize the poor state of affairs here in the US.

The other big news on Friday morning was the Fed's latest plan, that of increasing the Term Auction Facility from $30 billion a week to $50 billion. While we don't think the Fed will engineer another interest rate move Between meetings, we do think they will have no choice but to lower rates at their next meeting which is only about a week off, March 18th.

On Monday when the market opens, there will be many that will expect a rally. With all the bad news out there, the world is expecting the stock market to find a "bottom". Every time we see a drop, there are buyers willing and able to step in.

Our post is brief again this evening because we want to focus on the decline that we are in. Our last post suggested that the NDX (NASDAQ 100) had about 100 points to go for the next move down. Since it only dropped 5 points on Friday, there should still be about 100 points to go. We remind you that this should be the smallest amount and it could move more. It's just that there is a pattern here and the market likes to trade it.

As we go down on this move, we think there will be ample opportunity to find places to trade from. We just don't want to get in front of this train. There are plenty of ways to lose money in the stock market and we want to avoid the one where the market drops about 10% and takes our stocks down 15% or more.

As the market gives us more information, we will try to interpret it for you to get an idea where the trading low might exist. For now, it's too difficult to predict the depth of the decline.

The speculation index was up on Friday:

FSI: 69.70

One more picture:

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