CHESSNOID

The Dow broke below 10,000 for a day.  The stock futures indicate there will be a good bounce.  Even as the markets were closing today, we were coming back from an 800 point deficit.  The question is will it start to rally back to 14,000 or will it start to plummet towards 7,000 (like our housing market).  50% off its high seems like a lot but if you look at both Google and Apple stock, which are both strong companies in my opinion, they are already 50% off their all time high of a year ago.

Technically, the charts show the moving averages trending down.  So if you are a numbers person, then the numbers are telling you to stay away.  Here is the graph at stockcharts.com I like to look at:

http://stockcharts.com/charts/gallery.html?$INDU

I like the P&F chart because it is easiest to read the data.  The daily and weekly view chart shows the direction of the momentum of the averages and closes.  They are definitely all trending down.  A couple of bounces are expected but they will all look like bear traps and I wouldn’t go long in this volatile market.

Fundamentally, the housing market is the source of all this global financial meltdown, and no solution has identified this as the true problem.  The $750 billion being spent will not prevent the tsunami of housing foreclosures on the horizon.  This next set of defaults will be uglier than the first hit because the economy is already in an extremely weakened state (high inventory of foreclosures, high unemployment,  all mixed in with high energy and food prices). Stocks look cheap right now, but my guess is they will continue to become cheaper.