A Dow To Remember?
Hi Tony. I just thought that I'd drop by to share some thoughts and observations regarding the broader markets.
Who knows, maybe it's just me, but things are beginning to look really ugly out there right now.
The most important consideration in determining the health of any market is liquidity, right? There must be more net money flowing into the markets than there is money flowing out of them. (Witness the recent events in the Canadian Markets in the wake of the Bre-X controversy.) April 1-15 is traditionally the strongest period for Wall Street as this is when there is a strong infusion of cash into retirement stock funds. That the market is experiencing a sharp and precipitous downturn at this particular time of the year seems most especially disturbing, Tony.
Also, one of the best signals of an impending serious decline in the markets is the temporary and sudden reversal of the existing down trend that occurs at the very end of a trading day. This sudden price action reversal often leaves the market average conspicuously on the plus side for that day. Or, a short covering rally as the professionals wisely refuse to fight the trend and go on a buying spree to cover their positions. Typically, the downward momentum immediately resumes on the following day. Monday's -164 point close, followed by Tuesday's +27 point close, followed by yesterday's subsequent -95 point close, is suggestive indeed.
Last. When the major markets have independent cycles then the economic health of each market is likely being determined by local (intra-national) dynamics. This suggests a stable world economic environment. When they begin to consistently trend downwards together they tend to create a self reinforcing cycle that can be extremely volatile. This can easily be the stuff that crashes are made out of. The major markets have been trending together of late.
Now check out and compare these two graphs, Tony.
The current 250 day trend line w/ 2 moving averages: 10 day & 40 day
dniquote.com
The 1987 250 day trend line w/ 2 moving averages: 10 day & 40 day
dniquote.com
Not good.
What will eventually transpire is anyone's guess. I am certainly no expert. But the present condition of the world marketplace appears to be very unstable. At least it seems to be from where I am sitting.
As an ex stock broker with 10 years experience, Tony, I would welcome your input. I really do appreciate your contributions on the other threads here at SI.
Warm regards,
JED
P.S. The stronger Canadian juniors, on the other hand, look a lot more promising. |
