Remembering 9/11, then and now at the stock market.

As we stop and pause and consider the events of 9/11, on this 10th anniversary, there isn't much I can say as I find myself as speechless as I was on that day, having watched it live on TV that morning. The world stops and remembers those who lost their lives, but the world does moves on, thank God.

I remembered the aftermath and the fact the stock market was closed for about a week and when it opened we took a big hit. The Dow had been as high then as 11,500, but it dropped sharply and over days and weeks went as low as 7,000.

This morning I have put together a 2 year chart of the Dow which will show the the tightening range we have been within the past month. The red lines on the chart below show this range tightening. The triangle is pointing to a further downward trend. The top red line shows that we had a trend headed down and that even though we broke to the upside, we resumed this trend over the past month as the red line was drawn to touch those peaks.

Where are we headed? Well I have drawn the blue arrow indicating where I think it's going and that is down. Could we go down as low as Dow 7,000 ? Yes and unfortunately we can go lower. Not a positive picture of things to come, but the world has changed since 9/11 and it's not been for the better.


The chart below covers June1, 2001 through Dec. 31, 2001 and shows the decline of the markets in the aftermath of 9/11.

Summary of this week in the stock market and where we go from here. (UPDATE)

At the end of this very volatile week in the stock market, with days up and down in a 500 points range, many are wondering whether they should sell or buy stocks. This is compounded by the facts that we are in an indecisive period right now and therefore predicting market direction is even more difficult in the short term. I have said I believe we are headed lower in the next 6-12 months, but I can't tell you when we drop further from here. We had closed below the 11,000 level this week on Monday and Wednesday, but on Thursday and Friday we closed above, closing at 11,269. I had said in my previous posts there was going to be a fight at the 11,000 level once we had broken below the 11,500 level. So, in fact, we did and, this testing of 11,000 level, may not be complete.

In the below chart, of the Dow over a 5 year period, I have added some red arrows to signify many of the significant drops in the Dow value followed by flat indecision periods, identified with blue flat lines. The purpose was to show that there is a period of time after a drop where the direction is uncertain. We are now in that period. As you can see below, it can last for about a month or so. Other factors are at play.

The news will dictate in which direction we go, and I think one could build a very strong case that markets will go down further. For example, this most recent major drop was precipitated by 2 events. The first was the concern over Italy and its debt problems and whether they were going to default, because they are such a large economy, they can't really be bailed out unless the EU started printing money like our Fed did. The second concern was from the Debt Ceiling deadline and the politics involved in almost defaulting here. This precipitated the S&P to downgrade the US from AAA to AA+ rating. Then the market tanked.

We are now in the stage where we have the Congress appointing a special committee to work out details to come to an agreement on where further cuts are going to come from. They must do this by Nov. 23rd. If they can agree on a package, there is no guarantee it will be approved by both Houses of Congress, because there will be no Amendments aloud. It will face an up or down vote.

Also, we have the 2012 Budget which must be approved by Congress by Oct. 1st. All this with the 2012 Presidential election in the background. The chances of having bipartisanship is nearly zero. That is why I see the market going down a lot more from here. As the expression goes, it is all baked in the cake. Wish it weren't so, but it is the stark reality we face. And the Fed has signaled they aren't going to do much more given the economy looks so weak. They said they will keep existing rates through until 2013, which is an unprecedented move on their part.

It took us 2 1/2 years to climb out from the low of 6,500 on the Dow. I believe it will only take a year to go down and retest that low, given the state of politics and the weakness in the Global economy, with many debt laden countries. This will also produce social unrest at levels we have not seen in my lifetime. We are starting to see the early stages of this now.

UPDATE: Monday 5:35am PST.

The Empire Manufacturing Index data was released at 5:30am this morning. The reading came in at -7.70 for August compared to an expectation of 0.0 and the previous dat of -3.76 for July. This month's data is going in the wrong direction for recovery and for a healthier stock market. The reading this morning is not having a negative effect on the Futures market and from all I can see the market will start up this morning.

At 7:00am PST the NAHB Housing data will be released for August. Expectations are for a reading of 15, which would be the same as it was for July.

Tuesday's release of July's Housing starts and Building Permits will be interesting to see. Also tomorrow's data will include Import and Export prices as well as Industrial Production for July and Capacity Utilization for July. These are all lagging indicators. The most important of these are Housing Starts, Building permits and Industrial Production.

Market comments for Aug. 10th, 2011 (UPDATE)

Yesterday's market did rise as a result of the Fed's announcement to maintain low interest rates until 2013. Great, just what we need, more people borrowing cheap money with most likely no hope of paying it back because they don't have a job.

The Dow closed above the 11,000 level to finish at 11,239 for a 439 point gain. It seems to me now that the 11,000 level becomes now support level and 11,500 now becomes the resistance level.

Looking at the chart below, you can see that the move up was impressive if it wasn't that we've had so many large declines lately. Still, an impressive move nonetheless. I am expecting a move up to test the 11,500 level, then a pullback to test 11,000 again. Looks like we will be testing 11,000 support first based on a slightly negative Futures level. You see the news about low interest rates for as far as one can think right was the same as having very low interest rates these past several years. It didn't seem to do much for the economy, so I am doubtful this will have much of an effect on the market. It is still a very slow to negligible recovery. This market sold off for different reasons and those reasons are still relevant, hence the feeling we are still going to go down in these markets worldwide.

I am going to be plenty busy the next few days but I will try to post when I can. Thursday's Initial Jobless Claims is an important data point on Thursday morning.

UODATE: 5:45am PST

The Dow Futures are down this morning at -152, the S&P is at -17 and the Nasdaq is at -37 with all in a negative trend and deteriorating by the moment. Oil is up almost $3/barrel. Jim Cramer said this morning on CNBC that the "machines" are moving markets too rapidly for the average trader to participate. The "machines" he is talking about are the super fast computers which use algorithms to do its trading in the blink of an eye. This type of trading has been called High Frequency trading. Before the average trader can put an order in to Buy or Sell, these super computers have made thousands of trades. They have a definite significant advantage, as the Gatling Gun does over the Bow and Arrow.

The stock market: Where's the short term bottom?

Here we are with another day of opportunities or crisis. The Nikkei is down tonight 420 points at this hour to 8700 on the Nikkei 225 and the Hang Seng is down over 1200 points to 19,128. The big question is this, where is the bottom for our market and when will it bounce up a bit and stabilize. Based upon Asia, I would say we are going to go down more than where we are now on Tuesday. The chart below is where I see a stand taking place between the Bulls and the Bears, with the Bears winning the momentum game at the moment. The blue horizontal line at 11,000 now becomes the resistance level for the Dow, if the market does turn up. The red line at the 10,000 level is support for this market. It should make a stand between these 2 lines and stay between theses 2 levels until direction of the economy and the actions taken by the G-7 and G-20 becomes more clear. Italy's debt is still a major market concern, even though we tend to focus on our markets and economy right now.

If you haven't read the posts of the past few days, it would be worth your time. Thanks for visiting.