The assumption in your analysis, is that the new economy is what drives global economics. I think many would still beg to differ. The old Dow Theory addage that things pick up in the transport index before the industrial index still plays an important part to all this. Technology is there to facilitate things and well, I can't see that as being a leading index amongst all others.
The wave counts can be easily manipulated. But I think two things should be made mentioned. One, back to dow theory and the fact that a bear market observes 3 stages.
stockcharts.com
Primary Bear Market - Stage 2 - Big Move
As with the primary bull market, stage two of a primary bear market provides the largest move. This is when the trend has been identified as down and business conditions begin to deteriorate. Earnings estimates are reduced, shortfalls occur, profit margins shrink and revenues fall. As business conditions worsen, the sell-off continues.
Primary Bear Market - Stage 3 - Despair
At the top of a primary bull market, hope springs eternal and excess is the order of the day. By the final stage of a bear market, all hope is lost and stocks are frowned upon. Valuations are low, but the selling continues as participants seek to sell no matter what. The news from corporate America is bad, the economic outlook bleak and not a buyer is to be found. The market will continue to decline until all the bad news is fully priced into stocks. Once stocks fully reflect the worst possible outcome, the cycle begins again.
We've gone through an accelerated version of that cycle in the tech market.
What's coming this new year? The remainder of warnings season, around 40% of all warnings have yet to come. All the conference calls in the coming quarter will be plagued with some degree of uncertainty and negativity when it comes to growth and etc... and will likely lower their numbers to make things easier for themselves, conservative side. This doesn't mean recession. Just means less-aggressive growth. We've done the initial spurt when it comes to growing say the internet. Now it'll be about consistency in revenues/earnings and execution etc... Punctuated equilibria (from biology) applied to economics.
Once the media has hyped up the fact that Greenspan "should" cut come late January, there is still a likelihood that he doesn't. The cut vs. tax relief case exists and really, Greenspan isn't going to waste his anti-inflation combat mode with the unemployment rate still below 5%.
Sounds odd, that we need less people working to help stimulate things again, but that's just one of those model things that when put to use, don't always sound the most practical, but at the same time must be done...
my 2 bits ;)
cheers. |
