The negatives abound with a series of global officials seemingly going the extra mile in alerting the public to the severe threats present in the economy. In other words, investors and consumers continue to get a steady diet of official advice that in a sense is exaggerating the fear and anxiety. We have to wonder what the value is of central bank predictions of slowing through the end of 2009, when the capacity to predict the coming month’s developments is virtually nil. Nonetheless the market is also seeing persistent evidence of severe deflation in the scheduled numbers and in the market action of a wide range of physical commodities. Clearly renewed concern for Citigroup and ongoing fear for the Big 3 US Auto makers is accentuating the slowing fears, but those influences probably pail in comparison to the negative impact from the latest washout in equity prices. In fact, in the near term continued weakness in equity prices probably prompts the consumer to clam up even further and that is clearly leading more and more analysts revising their expectations downward. In short, we are in the midst of a downward spiral and the prospect of significantly lower interest rates and significantly cheaper energy costs are apparently unimportant.
DOW: With the US auto makers seemingly stalled in their efforts to get a loan from the US government, that has in turn prompted a series of forecasts predicting huge jumps in unemployment ahead. Apparently the auto makers want a loan and the ability to do what they want with the money, while Congress seems to be pushing the auto makers toward the DOE, which will require some type of fuel conversion effort. In the end, the market seems to be building toward a capitulation event or simply toward another big range down extension.
NASDAQ: The Nasdaq has already fallen to the lowest level since April of 2003 and it would appear that the next downside target will be 1000 off the monthly charts. In the current environment even favorable tech sector news is being lost in the shuffle and that suggests the market remains entrenched in a bearish outlook.
S&P 500: The S&P has already fallen below the 800 level on the monthly chart and that would seem to leave the October 2002 lows of 767.50 as a possible target. With more weak data expected to flow and the extremely weak action in the stock market probably injuring holiday shopping prospects even further it is difficult to come up with something that could alter bearish sentiment. In fact, even if US mortgage rates get down to levels that fosters some optimism, one has to wonder if individuals will even attempt to capitalize on the windfall. It might take a slide to $40 in crude oil futures just to get retail gasoline prices down to a level that would even begin to bolster consumer confidence in the current environment.