Ten Lousy Points

Anyone who’s read this blog over the past couple of months knows I’m confident we’re following in the footsteps of the 2007 top (and most of the other significant tops since the 1930s.)  If you’re new here, take 30 minutes and read through the posts listed here.

Lots of euphoria in the markets today.  Great news all around, as long as you don’t look too closely.  I’m reminded of the morning of December 21, 2007 (no, I don’t really remember; but I looked it up.)

Even though it was the week before Christmas, not everyone was full of good cheer.  Unemployment had ticked up from 4.7 to 5.0%.  Bear Stearns had reported its first ever loss, shuttered two hedge funds and had its credit rating lowered from AA to A.  And, housing starts had dipped to a dismal 1.2 million.

Fortunately, TPTB came to the rescue.  The Fed lowered the discount rate from 4.5% to 4.25%.  And, in an unprecedented show of cooperation, it was announced that the Fed, Bank of England, Bank of Canada, ECB, Swiss National Bank would coordinate to make available up to $64 billion to ease credit conditions.  That’s billion with a “B.”

There was a Santa after all!  The Dow soared 205 points, the S&P; 500 over 21.  The next two days tacked on 13 more points.  At that point, SPX was just 10 lousy points from completing an inverse head & shoulders pattern that might have sent it up 125 points to 1635.  That’s a bunch of Beemers!

We all know the rest of the story.  Suffice it to say there were a lot of hangovers those next few weeks that had nothing to do with New Year celebrations.  SPX dropped 120 points in 2 weeks, 230 points in 4 weeks and 750 points by the following Christmas.

Ten lousy points…that’s all we needed.  TEN.  LOUSY.  POINTS.

So, here we are 3 1/2 years later.  We don’t have the exact same set of problems.   Bear, Lehman, WAMU, etc. are gone, but we do have BofA — only, it’s down 50% from its 2010 high.  It just reported an $8 billion loss.  Goldman’s doing great; it’s only shed 30% of its recovery high.  Even Europe is fixed; they’ve announced it over and over.

And, the Fed– the Fed has pumped hundreds of billions into stimulating the economy.  Okay,  there were 3.8 million families foreclosed on in 2010 — up 2% from 2009 and 23% from 2008.  But, at least unemployment is dropping — only 9.2% (16% if you count the millions who have given up.)

“And, look at the market!” you say. “It’s more than doubled since 2009.”   If fact, we had one of those crazy strong days only yesterday — just like December 21, 2007.  The Dow wasn’t up 205 points, but 202.  That’s pretty good, right?  And, the SPX, while not up 21 points, was still up a respectable 19.  That’s something!

Now that you mention it, I’m getting pretty darned excited.  Didn’t we just complete an inverse head & shoulders pattern earlier today that should send SPX up to 1344?

And, if we hit 1344, we’ll be spitting distance from completing an even bigger inverse head & shoulders pattern that should send SPX up 90 points to 1444!

Let’s see, zip up to 1344, then tack on just a little bit more and we’re virtually guaranteed to go through the roof!

Hmmm, the tacking on part…  If I do the math right, we’ll only need 10 lousy points!


I’m getting my 750Li in black.


Ten Lousy Points — 6 Comments

  1. Yeah, I've been thinking about how that might all wash out. Sell the news? Or maybe it doesn't really matter exactly what kind of deal will be struck, it won't be good enough to satisfy the market in any case. Maybe the reality will sink in that we're in for a world of hurt and that the approval of more money printing is a disaster, not a blessing. I guess we're going to find out. In the meantime, just a simple MA analysis is suggesting a top might already be in… at least to the extent that the market sells off to challenge the H&S; possibility. I wish I knew… but don't we all?

  2. My apologies. I should have made the sarcasm more explicit. Between you and me, I'm pretty sure we have one more bump, probably no higher than 1344, before it all comes crashing down a la December 2007. I expect it to coincide with a debt ceiling announcement in the next day or two.

  3. I could swear I detected a bit of sarcasm in today's commentary Mr. Pebble. lol

    Admittedly I've been flip-flopping like a tasered pig lately, not able to draw any conclusion about which way I think the market is heading. So I've just stepped aside over the past few days, hoping for some sort of signal or indication. This is not characteristic of my style though… to exercise patience like this.

    So with about an hour left in the day I went short IYR. No particular reason. lol

  4. "There was a Santa after all! The Dow soared 205 points, the S&P; 500 over 22."

    Yesterday, Dow up 202 points and S&P; 21. Nice.