Tuesday, July 7, 2009

Technical Meltdown?

Dow and S&P crossed down 200-day moving average. So much for good technical indicators I wrote about last week. There are different hypotheses around why is it happening. I subscribe to two right now: sell-off before earning season and long awaited correction.

We'll see the difference next week. Reaction to the earnings will show. But I'm afraid it's a correction.

I'm still operating from the 1932 perspective. And if you look at Dow Jones Industrial index chart in 1932, you'd see that there was a sharp rally after market bottom in July, and then there was long correction. That time, rally lasted 9 weeks, and correction took almost 6 months to unfold. This time, rally, measured between March 9 and June 12, lasted three months. Does it mean 9 months correction? Million dollars question...

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