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Financial news I consider important, with my opinion, which is worth as much as you paid for it.
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Tuesday, November 18, 2008

Stock Market once again on brink

The stock market is still trading in the range as discussed for last 4 weeks or so, as shown on the chart to the right. The DOW closed at 8,273, still above previous range low of 8,135. Even if the DOW goes below 8,135, I am not concerned, unless it closes below that number. Once it closes below that number, that puts the DOW in the possibility of a freefall down to 7,750 range.

If the DOW closes below DOW 7,700, at that point its good night, likely to have world sell off and an all out collapse to DOW 5,500 range.

In any event, I am still thinking, although starting to have second thoughts, that the market will hold above DOW 7,700, and looking for the market to stay above DOW 8,100 on a closing basis.

If the stock market closes below DOW 7,700, I may liquidate all my positions, take the hit, and watch from the sidelines until the market moves up with conviction.

In other news, President Bush stated the government would NOT seek the funding for the second half of the 700 Billion bailout package.

This to me is stunning, since it was presented to the US taxpayer the world would end without immediate funding of 700 billion dollars. Also, this president has known no bounds in deficit spending, and it seems odd to all of a sudden become frugal. My best guess is the US bond market is starting to show strains, and the government doesn't want to flood the market with more US bonds.

As previously discussed, once people stop buying US bonds in sufficient numbers to cover the US debt spending, interest rates must then rise to attract buyers. And rising interest rates is no one's friend. So my guess is Mr. Bush doesn't care if we deficit spend an additional 350 billion pre-approved debt on top of the existing 12 trillion dollars of US debt, but rather, his hand is being forced.

As discussed, urging everyone to contact their congressman to stop the bailout, one of the reasons for the bailout is to fund foreign banks. Today the US government gave 15 billion dollars to BAC, who in turn then bought for 7 billion dollars Chinese bank "China Construction Bank Corp". Please keep in mind, there is NO MONEY for GM, but plenty for foreign companies, especially the Chinese, who have a 2 trillion dollar bond gun pointed at our heads if the US doesn't play nice. GM should sell themselves to the Chinese, and the US government then would bail them out in a heartbeat.

Safest play is still US Government Bonds with slow diversification to resources to hedge against US currency devaluation.

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