PaPa and MaMa Argument Continues...
The totally low trading volume today shows that investors chose to stay on the sidelines instead of betting on a direction. The rescue plan is a good one (albeit with very doubtful numbers) and one that will certainly be passed but what about its long term effects on the economy? Despite what Paulson says, all economic models point towards some side effects but the economy will certainly be better off with than without the rescue. The problem is, this difficulty in forecast due to the fact that this rescue and crisis is totally unique as well, made it hard for institutional investors to take a decisive stand. Will the rescue plan result in more inflation? According to my models, Yes. But it would also help to push the economy back nearer towards its potential GDP level and the result is of course a Cost Push Spiral. With this prospect in mind, does it make sense for institutions to pour right now, or perhaps wait another 6 months?
For now, the Dow continues to be in a slightly bearish inclined short term neutral trend within the framework of a primary bear trend. As the theory of technical analysis goes, trends are assumed to persist until changed by a stronger force.
Labels: fundamental analysis, technical analysis
2 Comments:
Yes, the volume is low if you compare it to average volume in September, yet, if you compare it to average daily volume over the year you will see that it's still big. I do not know what is going to be over the year, yet for near future I think the market has to move up to release itself from the oversold levels it hit last week.
Totally agreed. The only question is "when". The Dow is definitely in a neutral trend waiting for a breakout and with the market this oversold, it could breakout to upside, even if it means a dead cat bounce. This timing can be very tricky.
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