posted on Feb, 27 2007 @ 03:47 PM
Having worked as an analyst many years ago, the behaviour is worrying of the Dow Jones.
Taking a look at the technical analysis...
Today, each fall has been followed by a "Dead Cat Bounce" recovery that is repeatedly less than a 50% retracement, and, frankly closer to the lame
1/3 recovery. There is clearly no strength left in the market which has been forming a upturned bowl formation for several months. Catastrophe is
likely in the very near term, probably before the weekend.
Taking a look at the fundamental analysis...
In 1987, one such event that turned a steep decline into an all-out crash was the attack on Black Monday by the US on an Iranian oil rig. The view of
brokers was "well, that's it, they've started shooting - SELL". The same holds true now and the slightest incident will trigger a heavy sell-off
if the markets view that war is imminent. As far as the general fundamentals are concerned, it is as black as black can be. Traditionally, the
markets view that old industries have a Price to Erning Ratio (P/E) of about 9 and high flying companies have one of about 18 maximum. The AVERAGE of
the Dow Jones is now about 25. This is a figure roughly the same as saying, cure for cancer is certain in the next few days, warp drive the week
after, 50 new oilfields the size of Alaska by the end of the month. In short, the whole market is one vast, scarey speculative bubble, with an index
that is walking on air. And the real economy, as black as the Signus X-1 Black Hole. Huge deficits, nothing to cover it, industry retooled to serve
a vast unweildy military that is not happy to continue the fight and its all base on obscene levels of debt that would have made Enron look like a
winner. Furthermore, with all of America's enemies and competitors holding the debt, like China, it has become the "Yellow Man's Burden" and one
which they will be only too happy to offload as soonas possible.
Advice? Consult your broker or financial consultant, assuming that you can talk him down off the ledge, and start buying PUT options or, as a last
resort, start placing $10 bets with "Paddypower", so when it does crash, you'll have enough cash-in-hand to hold out through the long, dark,
irradiated nights of the 1930's style depression that is certain to follow.
(...Incidentally, I have in the above assumed that there will be NO ATTACK on Iran. Should this happen, then the view would be far less rosey for
AMerica and worse a few hundred fold.)