Market outlook for week of January 12th, 2009

We seemed to slowly climb to a high in major indexes this past week culminating Wednesday at its peak. We were closer to the high of the range of 7300 to 9300 on the Dow since September. According to a Raymond Meriman of StarIQ quote, in his Market Outlook for the week of January 12th, he states the following: the high of Wednesday was at least a major cycle crest (a major cycle crest is the one-third phase to the longer 18-week primary cycle). At the major cycle phase, a “normal” corrective decline is healthy in bull markets, and is the pause before the next surge up begins. In bear markets, however, the major cycle phase can be more than just a “normal” retracement. It can be the resumption of the bear market. So the extent of this decline is important in the determination of whether or not the recent rally was just a “bear trap” or that pause that refreshes the market before the next rally to new monthly highs.

So the question is, Where are we headed? I believe we will start a return to the Bear Market and this was the last major rally before the next storm. In part, it is why I have asked my readers to stick with SDS and TZA, the ETF Ultra Shorts, SDS on shorting the S&P and TZA shorting the Small Caps x 3. I agree with Meriman, that this is all occurring at the time President Obama is sworn in and there are signs the Republicans all of a sudden have religion about fiscal restraint and watching deficits. They must have been given new GOP Financial Bibles or something to read. Where have they been the last 8 years? Asleep at the wheel and complicit in everything which was wrong with the last 8 years, that's where, and by the way lest we forget, one additional reason they lost the election.

I have heard more layoffs are scheduled this month, adding to the unemployment numbers. Expect even more in February. This will ensure that the first week in February creates another blow to the psyche of the public, not only here but around the world. I spoke to an financial expert I can't name, who told me that "most people have no idea how bad things are going to get and that people in the 30's and 40's especially have no idea how to weather the coming storm." I said "coming?" He said "Yes, and 2008 was nothing compared to what the next few years will bring." That matches what I have feared and warned about here with just an intuitive sense fueled by observations and market trend analysis. I have also spoken to someone who travels in the high circle of the Executive Search firms and was told there are few if any senior positions available now, where there was always an abundance of openings and those wanting change. That has changed and things have gotten much tighter.

So how are you coming in putting together that financial plan I discussed in a previous post? Have you gotten more serious and active to give what I have recommended some chance to help you manage the storm? If not, still have those excuses you hold on to like a tight pair of shoes? I have given all here some very sound advice. For new readers I suggest reading the following Blog posts by just clicking on them.

Nov. 12, 2008 How can we turn the ship of this economic crisis?

Jan. 3, 2009 Trading strategies to weather the continuing and worsening financial storm.

and, in my view, my best one recently,

Jan. 9, 2009 When will you know the economy is getting better? A look at the psychology of the current financial storm.