Monday, February 23, 2009

Wall Street and Technical Analysis: Are We DOOMED, or Should the Stupidest People on Earth Be Ignored?

The stock market today "broke out" on the downside, as the S & P 500 closed well below 750. If "technical analysts know what they are doing (luckily, they really don't), this is BAD news for the stock market. If w have truly broken out of the trading range we have been in since October, there may be no bottom to the stock market. This probably has little significance for the economy as a whole, other than to indicatet hat the news is so very bad that those computer programs "bying on the dips" have FAILED. That MAY cause a new strategy of SELLING EVERYTHING until we hit a selling climax.

I still think we are due for a bounce upward. But, as I said, I do not predict day-to-day stock movements. I can say that now is a good time to invest for a long term investor, unless you have reationally concluded that that the absolute fools on Wall Street have made the "market" such a computer gaming casio that long term investing is a loser.

I can tell you that the selling today was overdone (for a single day). Those selling at the end were trading totally on momentum--irrationally. That does not mean that the selling will not continue, especially if enough people act on the "break out" to the downside (a self-fulfilling prophecy, as is ALL of "technical analysis").

As I said, my GUESS would be that we will still have a bounce upward--perhaps a big one--on any excuse. I would be more certain if this latest irrational move (because of magnitude) had been to the upside. The problem is that the stock market has NOT GONE DOWN ENOUGH from October, given how bad the economy has gotten. That makes a big downside move possible, as a "catch up" for those irrational up days when there was no good economic news to support them. Was there anything really new today to justify the magnitude of today's selloff? Nope. But neither is there any good news to support a real stock market rebound (beyond a "technical" bounce).

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