At the current levels, the market is crumbling with an even more dramatic parabolic angle and velocity of movement than that with which it built higher and higher through the mid-1990s. Unsurprising, but the sheer relief of peak to elusive trough is enough to leave me aghast. Co-workers and clients I speak with have the pall of despondency, resignation and brokenness cast over them. Hope ebbs low.
I came across this pile of journalistic garbage from Businessweek the other day. After laughing at it and brutally criticizing it with others, an interesting conversation ensued, regarding something made mention of here-and-there but which isn’t getting much play, if any at the moment.
That’s the idea of capitulation: relinquishment of heretofore tenaciously-held long positions, shaking those who’re on the fence about riding the bear off, and a generally massive wave of liquidation that is event-driven: a major bankruptcy (GM and GE come to mind), a sovereign default (Eastern Europe), or some other devastatingly bearish event.
Nothing technical has stanched the bleeding, and that’s simply because below Dow 7200 there’s is virtually nothing wide enough to land on until 4k. There are points of varying noteworthiness: 6300-6500, 5800, 5275, 5000; but nothing persuasive. Below 610 (and there is a cluster of support 610-680), the S&P offers nothing in terms of support before 475-500.
But 4000 and 475? Not impossible: those levels represent about a 70% decline peak to trough: the Nikkei suffered worse in the nineties, and the Dow suffered far worse in the early thirties. At this point, all that I see averting an irrepressible sell-off is a capitulative market event. The sentiment is there: of that I’m certain. All that is lacking is the token catastrophe that changes the game and raises the volume.
Oddly, that all sounds optimistic.
Very possible, IMO. And it wouldn’t take much to propel the markets to those levels — only a well placed MME. The timing is right, certainly, for the required reaction that would generate such a capitulation. The current crisis is certainly serious enough to force the DJIA much, much lower than it is. I was looking at a comparison of where the index is today vs. where it was during the GD — think it was on the Big Picture or A-Dash blog…can’t remember. We have much further to go, according to that comparison.
Comment by The Lonely Trader — March 7, 2009 @ 2:56 pm
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Comment by thai bar — May 4, 2009 @ 11:42 am