Am beginning to think that the markets - all of the markets, including commodities and foreign markets as well as the Dow, the SnP, the NYSE, the Nasdaq, and the brokerages, and everything else - might now have the economy held hostage, and may force the Fed's hand.
So many indices and stocks - including especially the financials and brokerages, as observed here already - seem to be poised right on last-chance support, and along with them so is the entire US and global economy. (Those head-and-shoulders patterns don't emerge out of thin air; they represent the ebb and flow of hope and fear, and the potential triumph of the latter.) The housing market and consumer confidence could tip over in a second, and the still strong chance for a soft landing could fall over with them. A chain reaction of bankruptcies, defaults, cutbacks, and layoffs could ensue, not to mention a wave of mutual fund redemptions as 100 MM Americans wake up to the notion that they're in danger of spending their old age in poverty rather than the relative comfort they've come to expect. Throw in any potential external shock - from Japan, most obviously, but there are other candidates - and the whole superstructure could enter an accelerating spiral downard, and dealing a blow to cultural self-confidence that could be very difficult to heal. Meanwhile, the speculators have already been crushed, and inflation is turning into less of a threat than deflation. Some might argue that the Fed can't be seen to be in a panic mode, or to be rushing in to rescue the markets, but rescuing people from speculative errors is one thing, dissuading them for a generation from investing at all is another.
I think the same Fed that would suprise us on 1-03, might be capable of moving a full point on Tuesday, but I think .75 is more likely. It's looking like .50 would be a disaster.
Back to TA for a second: When indicators of different types - from chart patterns to magazine covers (all three major newsweeklies) to P/C ratios to stochastics to ADXs and so on - reach extreme points all at once, there's as good a chance for a reversion to the mean as for extension of the trend.
Someone remind me why I could be wrong. |
