Stock index tried to rally today, but gave it up in the final minutes of trading. There had been some minor evidence of price rejection over several attempts at news lows over the past couple of weeks. However, the price action of last Friday, as well as today, has negated that scenario. Trends and momentum have been clearly down, so the benefit of the doubt must still go to the bear case. I always look for clues to a change of direction, even though at times is like grasping at straws. The advance/decline ratio has resumed its steep decline. Volume patterns seemed a bit negative, at least in the way I view them. Implied volatility is still off the charts. Regarding those rejection tails on the daily bars, the action over the last two sessions seems to have volume distribution profiles that suggest the lower price zone are now being accepted. Everything looks so bad right now that I have to think the market will soon make a move in the opposite direction. Maybe it’s just my contrarian nature. I have no technical evidence, yet.
There is a fed meeting this week, and there of course is much talk of further interest rate cuts. I guess if there is a cut, the lessons of the past in this country and in Japan will go unheeded. The huge bull market in the dollar doesn’t suggest much more in the way of interest rate cuts. I still hear analysts talking about the collapse in the dollar, but a quick look at a price chart will show that you have to go back about 2 1/2 years to find a level where prices are currently trading. Some traders hold on to old ideas far too long. Regarding the political spin on the economy, the extremely biased news media would have everyone to believe we are in the worst economic shape since the 1930’s. Really?! The 30’s? With over 25% unemployment and soup lines? Is that what the news media really thinks is the economic condition now? I think one only has to go back to the Carter years to find economic conditions much worse than they are today. Just recall the inflation rate, the interest rate, the unemployment rate, the totally inept president. And by the way, if my history is correct, it seems like that was the last time there was a democrat in office with a democrat controlled congress, also with a 60 seat filibuster-proof majority in the senate. If the polls are correct, we are to repeat history. And if my intuition is correct, this time around I think the country will wish we were back in the Carter years. The Pelosi, Reid, Obama trifecta is truly frieghtening. I think that is what is bugging this market. I know the pundits on CNBC and MSNBC (NBC = National Barack Channel) will say that Obama is rising in the polls because of the falling market, and that voters will blame the current president, even though the blame for the credit mess rests far more with democrats. Fannie and Freddie and Clinton and Barney Frank had far more to do with the mess than Bush, but Bush gets the blame, and Obama gets a boost. But I think the market is looking ahead, and that these declines that seem irrational and excessive are frightened of what a European, or worse, style of socialism will look like in the United States. There will be little to stop a power grab of major industries. Dissent won’t be tolerated, as can be clearly seen by the nature of this campaign, when one candidate will dictate what is off limits regarding questioning, while the other party gets grilled over wardrobe issues. I pray for a miracle next Tuesday.