Yesterday I told you before market opening the S&P 500 Futures being at resistance of 1180-90. That was a good opportunity to short as short term it was bearish and what a profit it'd have given ! it dipped to below 1140 !!! Then as usually happens in oversold markets - a fierce Bear Market Rally. In less than 24 hours we have seen more than 100 points move !!! But what happened has turned the short term down trend into short term up trend. The S&P 500 Future is well above 200 SMA on Hourly. However, the Medium and Long Term Trend are still down. Even the Moving Average sequence is still bearish. On the hourly chart, there is a symmetrical triangle formation, which usually is a continuation pattern but it can go in other direction too. My advice is keep a close eye on this triangle and see which side it breaks out to. The next resistance is at 1250 and then 1263 according to Daily Chart.
Well, coming to the mid-day rally in US, the ostensible reason is the govt declaring itself official matchmaker for troubled banks. When I read this news http://biz.yahoo.com/ap/080919/financial_meltdown.html
I could not control my emotions and started laughing out loud. The govt "going to rectify the problem in economy by aiming at the heart of the problem" !!!!! Oh my GOD. Can you believe this? The govt "could" do something to address the problem by "aiming at the heart" !!! Then where were they for so long? This is a cruel joke. I tell you the fact - The govt can't do anything. There is NO WAY OUT. PERIOD. The solution that they are talking about is nothing more than the govt acting as "buyer of bad and troubled assets" - with the money they don't have, with the taxpayer being the ultimate sufferer. I am not an American, but if you are then you as a taxpayer are doomed. Read this from the same news link:
"After the discussions Thursday night, Paulson said the goal was to come up with a "comprehensive approach that will require legislation" to deal with the bad debts, or illiquid assets, on bank's balance sheets. He did not provide any details, but the plan taking shape called for Congress to give the administration the power to buy distressed bank assets."
The other moronic way the govts found to stop the "crisis" in equity markets is they are banning short selling or restricting it. This will be the last nail on the coffin. They will destroy the liquidity whatever of it is left and dent the confidence of traders.
Dear friends, you must take example from Japan, which had similar crisis (housing and banking) in the start of 90's. Please Read my earlier post on this issue to know my views on the issue. What happened was the govt there refused to let the markets take their own course and intervened and tried to "save" the markets. What happened? even after 18 years of continuous "efforts" and interests rates nearing zero, THE JAPANESE SHARES ARE DOWN FROM THE TOP OF THE BUBBLE. Do you believe the US should follow the same path? Moreover, there is a difference and a significant one - US is NOT Japan. If US also goes for that prolonged period, then it will be all different. In Japan's case it was the US where money went when the interest rates were kept artificially low. Where will it go in case of US, which is the largest borrower itself and already under BIG debt?
Very troubled times ahead... Don't be a stocks investor. If you have money, invest in Gold.