Charting Stocks

Charting Stocks

First time readers are encouraged to read my 2007 outlook report which was written on January 1, 2007. Click the link below to read.
The Coming Stock Market Crash of 2007

In my previous post, I mentioned that the short term move up would most likely stall at 13,500 on the Dow Jones Industrial Average. I also showed that 13,453 would be another reasonable chart level to stall because it coincided with a key Fibonacci level of 61.8% (You can see the August 8th chart here). The prediction held as the Dow closed at 13,449 on September 4th before beginning its next leg down. I was off by about .02% (I guess no one is perfect!).

The next leg down is well on its way. Over the coming weeks, I expect to see spikes in volatility but I do believe that the trend will continue down. Below is a daily chart of the DJIA.

Media Failure

The media quality in this country has deteriorated on many levels and has caused a great deal of false public perceptions which have proved to be, and will continue to be, very costly.

The credit “Crunch” is a full blown crisis reminiscent of the years preceding the great depression. The expansion of the 1920s was driven by borrowed money as it has recently been. In the 20s you could buy stocks with only 10% of the cash value of the securities and banks would loan the other 90%. Money was cheap, and readily available to be borrowed. Sound familiar? This time it wasn’t stocks, it was real estate.

In the 20s, the Florida real estate market was experiencing the greatest real estate boom of its history. There was a mad rush to get in “before it was too late.” Of course, it all came to an end in 1927 when a massive housing crash wiped out Florida’s economy and eventually contributed to the stock market crash 2 years later.

Florida’s real estate market peaked in 2005 and has been crashing ever since. It is estimated that 30% of Florida’s economy is related to the housing market via construction, demolition, lenders, real estate agents, etc. Florida is at the forefront of this downward spiral and I believe it will again contribute to the coming crash of the Stock Market. (This is not a jab at my fellow Floridians!)

The Sub prime mess WILL and IS spilling over into the rest of the economy. People can no longer us their homes as an ATM machine and so consumer spending will slow over the coming months. After all, there was no big rise in incomes during this expansion to compliment the consumer spending jump. Where do you think the money was coming from?

Home builders and lenders are running for shelter. Smaller companies in these sectors have gone bankrupt and more will follow.

The August jobs number came in at -4,000 while economists were expecting an addition of 115,000! This was the first negative number in four years and a massive miscalculation.

The financial sector alone cut 35,752 jobs in August — the highest one-month total for the field in 14 years. At 102,758 layoffs this year, the field is well on its way to beat its annual record of 116,515 cuts in 2001 (The last recession).

Ron Paul for President
Who’s Ron Paul? If you haven’t heard of him yet, it’s because the media and political machines have done all they can do to suppress his run for office in 2008. Why are they so scared of Dr. Paul? He is for abolishing the IRS, the CIA, the IMF, and the federal reserve system (Which has reduced the value of our US Dollar to 4 cents from the time they took it over). He is against massive deficits, and for the Gold standard system (Some people aren’t aware that our money hasn’t been backed by gold since Nixon changed the Law in the 1970s. Our Dollar is backed only by the full faith and credit of the Government which is on the verge of Bankruptcy). Chart below shows the US Dollar which just made a new 14 year low.

Dr. Paul has won all of the debates he has participated in and is the most searched for candidate on the internet but you wouldn’t know it by watching Fox, MSNBC, or CNN. (Google him to see for yourself) He is indeed the front runner by most standards, but the media continues to call him the underdog.

I encourage all of you to go to his site www.ronpaul2008.com and learn about where he stands on the issues. The US economy will soon suffer a massive contraction because of decades of government and political greed and failed policies. There isn’t a Democrat or Republican running for office who would do anything much different. We desperately need to act preemptively to our own economy and not the economies of other nations.

We live in a world where you must question everything. If you simply digest the information that the media conglomerates force feed you then you are a prisoner greater than those behind bars. The market will crack, people will loose their jobs on massive scales, we will be deep into a recession with no one left to loan us money. My fear is that it will take an event like this to change and reform our system.

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1. Forecast 2009: There Will Be Blood
2. US Dollar Losing Steam
3. Kondratieff Vindicated? A Look at the K-Wave
4. Review of 2008 Predictions a la Wall Street’s “Finest”
5. Charts of the Week