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Joe Nostradamus Ph.D.

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posted on Mar, 7 2009 @ 05:27 PM

When economy bottoms out, how will we know?

There will be more articles of this nature in the mainstream media as the bedridden economy doesn't show signs of any improvement. The article quotes well-paid folks who either teach or advise the rich what to do with the loot.

Most of the happy-days-are-here-again indicators are hidden in the bunch of text issued by the government that only MBA's can decode, coz it's written for them.
But there is one possible indicator looming tall and easy to see, and it regards the stock market.

WHEN WILL THE BOTTOM COME?: In downturns over the past 60 years, the S&P 500 has hit bottom an average of four months before a recession ended and about nine months before unemployment hit its peak.

Investors will be looking for turnarounds in housing, lending and employment, plus signs that consumer spending has picked up. Then market players would be more likely to move their money from safe havens, such as gold, back into stocks.

Other investors may look to obscure indicators such as the Baltic Dry Index, which tracks the cost of shipping iron ore, grain and other materials. Rising rates can indicate demand for raw materials is increasing, which suggests a strengthening economy.

But most of all, traders are waiting for a sudden spasm of selling known as capitulation. That wrings fearful investors out of the market, and as they rush out, bargain-hunters rush in. Capitulation would trigger a huge plunge in prices and frenzied trading volume.


Sounds dramatic, doesn't it?

If that is destined to occur, then May 7 would make one wonderful CD (Capitulation Day).

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