Has the Stock Market Crash of 2010 been averted due to the loudly proclaimed “economic recovery”? This article is a continuation of the earlier DOW JONES – Stock Market Crash 2010 written in January, and in response to an email sent by a reader of that article. Reader’s email: Your 1/24/2010 doom piece seems to have dissolved, perhaps thanks, in some small part, to B. Obama efforts. Do you have a follow up piece loaded with admiration and hope? Thanks – you came up first on a google search for 2012 DOw Jones predictors. – x
Dow Jones Chart 30 March 2010
Sometimes technical analysis forecasts are seen by some as “doom”, but it all depends on your perspective. The current system of Keynesian/neo-classical economics is due for a major reality check (correction), as it can’t maintain its current level of debt-creation indefinitely. This system needs to be replaced, or suffer collapse under its own weight (of debt). In answer to Mr X – Should we really have admiration for greedy manipulators that enslave our people’s future with more debt? Is there hope when no real changes are made and the same methods are being used (more debt) to try and solve the problem? These clowns keep throwing fuel on an already out-of-control fire, and want us to believe this is how you do economic recovery?
The Dow Jones has struggled since January, to rally only 5% higher than the 50% retrace of all losses of the first wave down (October 2007 – March 2009) of its bear market cycle. It has gained almost 2% on the high of January (today’s close 10907). The average gain over the last week or so, has been around 10 points per day, hardly a convincing bull run. The fractal on the chart over the last 2 months looks similar to that of the August 2007 to October 2007 extreme high, and we all know what happened from there. I am not saying that it can’t rally higher, just that it seems over-extended in time and seeks equilibrium.
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Dow Jones Aug 2007 – Oct 2007 Dow Jones Jan 2010 – Mar 2010
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The current market rally looks like another “sucker rally” to me, and is setting up for a stronger decline than we saw in January, when all gains (over 4 months) since September 2009 were wiped out in 3 weeks! This decline was over 900+ points or 9% of value, just short of the 10% which is a general indicator for a stock market crash – today’s markets really like to stretch the limits. So Mr X, go ahead and buy up if you like, after all, President Obama is looking after you… I hope. Just remember to get out quick when the Dow heads down to its recent low (of early February) at around 9800, as there will probably be a “gap down” once this point is breached. My ultra-high level for the Dow (on a 5% stretch past the 50% retrace level) as mentioned in DOW JONES – Stock Market Crash 2010, was at 10880 points, and the Dow has been sitting around 10900 points for a week now, and looking lethargic.
The March rally looks exhausted, the institutional investor’s money is running out, P/E ratios are too high, and the Dow is over-bought and over-extended. It is in the short term interest of Wall Street, the big banks, and governments to inflate this balloon as much as possible, but like all balloons when over-expanded they pop. The stronger forces (deflation) are much bigger than daily/weekly/monthly small moves (subject to manipulation), and will force a deflation of debt, these major forces will win in the end, its just mathematics. The next decline will likely come as a shockwave through global financial markets, unexpected and unforeseen.
So Mr X, my piece on the stock market crash has not dissolved, but the mountains of debt created to run this circus will dissolve, and real soon…
Update: See what happened