Party's Over...

With the election party over, investors turn their capricious gaze upon the sinking economy again. The negative GDP and the dismal ISM number seemed to be registering at last as the market corrected over 10% in just 2 days. IMF's prediction of a global recession in 2009 also contributed to the bearishness today even though it is impossible to tell the extent of that contribution. Even though IMF's predicting 2009 to be recession year, I am actually predicting 2009 to be recovery year instead. Tomorrow's Job report (see economic calendar) is going to show another ugly unemployment rate and the market seems to have priced that in today. This could mean another pessimism crunch where the market could actually get back up a little tomorrow if the unemployment number turn in ugly indeed.

As ugly as the market action has been, the Dow is actually still within a short term neutral trend and could test the Oct lows by next week. Yes, this stock market crisis is not going away without at least one more final capitulation before investors start pricing in a recovery. It is always darkest before dawn... or could it be darkest before it goes pitch black like Jim Kramer loves to say? Well, at least it has never really been pitch black in the stock market before.


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