-- Posted Monday, 27 June 2011 | | Disqus

Rick’s Picks

Monday, June 27, 2011

“Phenomenally accurate forecasts”

You don’t need to be a chartist to see that the stocks will need to test the key low made in mid-March before anything serious happens. For the Dow Industrials, that would imply a fall of 378 points from these levels to 11556, or about three percent. What then?  Although a bounce seems likely,  we wouldn’t expect it to last for more than a few days, if that long.  Moreover, because the support is so obvious, we should expect the Indoos to dive toward it in the days ahead rather than approach it gingerly.  After all, why would traders buy the blue chip average as it is falling if they “know” it’s going to fall at least to the support?  We might expect such buying and for a bullish turn to come from somewhere above 11556 if the market had a reason to rally. In fact, The Great Recession seems to be edging toward another flirtation with Depression – one predicated on further, intractable weakness in the real estate sector, along with whatever psychological fatigue is about to hit as a result of QE2’s epic failure to stimulate much of anything.

With respect to the stock market, we would ordinarily employ the Hidden Pivot Method to forecast price action for this summer. (You can learn to do this yourself, and to do it impressively well, by clicking here).  In this case, however, our target of 11506 only gets us halfway to the next logical low.  Once again, you needn’t be a swami to see that the Industrial Average will fall to 11000 if the mid-March low gives way.  The only question is, how quickly will it happen?  Our hunch is, very quickly, especially given the prospect of a budgeting battle on Capitol Hill. Although until recently we had viewed the debt-limit issue as a red herring, it’s starting to look as though the Republicans, goaded by Tea Party stalwarts, will dig in their heels.  As why should they not, considering that the Democrats are serious about trying to balance the budget on the backs of small businesses?  Obama and the Democrats still seem to think that anyone grossing $250k is a fat cat, but in reality that is the threshold at which small businesses in this country begin to enjoy success -- and with it, the prospect of hiring more workers. Leave it to Obama to try and kill the one sector of the economy that has the potential to rejuvenate it.

Republicans are right to resist, even if it brings the U.S. to the brink of default. And anyway, burdening the country’s most energetic and productive earners with stiff new taxes would raise a pittance in comparison with the trillions of dollars in debt The Guvvamint has run up in the name of stimulus. The impending fight on Capitol Hill isn’t going to be pretty, and we therefore shouldn’t be surprised if stocks fall hard in the weeks ahead.

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Information and commentary contained herein comes from sources believed to be reliable, but this cannot be guaranteed. Past performance should not be construed as an indicator of future results, so let the buyer beware. There is a substantial risk of loss in futures and option trading, and even experts can, and sometimes do, lose their proverbial shirts.  Rick's Picks does not provide investment advice to individuals, nor act as an investment advisor, nor individually advocate the purchase or sale of any security or investment. From time to time, its editor may hold positions in issues referred to in this service, and he may alter or augment them at any time. Investments recommended herein should be made only after consulting with your investment advisor, and only after reviewing the prospectus or financial statements of the company. Rick's Picks reserves the right to use e-mail endorsements and/or profit claims from its subscribers for marketing purposes. All names will be kept anonymous and only subscribers’ initials will be used unless express written permission has been granted to the contrary. All Contents © 2011, Rick Ackerman. All Rights Reserved. www.rickackerman.com 

-- Posted Monday, 27 June 2011 | Digg This Article | Source: GoldSeek.com

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