Friday, October 10, 2008

Bottom?

Back on Monday, I mentioned that the 8,000 level on the DJIA was the last line of defense. The Dow traded just below 8,000 during the summer of 1998 and fall of 2002 / winter of 2003. Both times, the market rallied back to 10,000 in six to nine months. I don't believe technical analysis is the best predictor of financial market price action, but it does provide some insight into investor psychology. There are real problems that the capital markets and consumers must face. Liquidation is a result of deleveraging, it only stops when debt equilibrium is attained.

1 comment:

Anonymous said...

I think investors expecting a V bottom type of rebound will be sorely dissappointed. The economy has been relying on consumer over spending for these last few years of expansion. Even though panic has probably bottomed consumers will go into delevering mode much like their institutional counterparts have, thus grinding all but the best consumer driven businesses into the ground