Biggest Point lost for Dow

6/6/08

What have I been saying about this FAKE rally, folks? Are anyone still bullish about the stock market, US economy, Fed's magic work...etc? I always warn people I do not bullish about the Dow trading over 13000 level. Also, the technicals were telling me it is the highs... It seems I am right again about the top of the rally call. All, the stock market must revisit the lows of 2008 for sure this summer or coming weeks. High oil, high inflation, housing bust, credit squeeze, job layoff continue announced by big corporation,...etc. Despite Fed have done most their work to avert the economy to get into recession, the economy is really really slowing and has already in recession and lasting to next year. I have an interesting observation to share here.
The chart of S&P from 2000-2002 looks awfully similar to the chart 2007-present. Here are the similarties.

1. We had the first downwave between Sep 2000 and Mar 2001 and that took S&P from 1500 to 1100. Presently, our first downwave is between Oct 2007 to Mar 2008 and the S&P sink from 1550 to 1250.

2. Then the Bear market rally(Fake rally) towards 200MA/200EMA take place between Mar 2001 and May 2001. We have similar rally from Mar 2008 to May 2008. 200MA has acted as a formidable resistance.

3. The second downwave started around May 2001 and ended in Sep 2001. During that period, S&P has dropped from 1300 to 950. We probably already in this downtrend right now.

If this chart pattern happen again, we might be in the second leg down right now and dur sep-oct 2008, we might hit another intermediate bottom and we might have the second uptrend rally towards 200MA. We might get the end of the year rally and then sometime in March 2009, the third downleg starts and we might finally bottom out around Oct 2009 with a retest in Mar 2010.

Well,this might not repeat again. But, it would be wise to keep in mind it might be happen and we have a guide ahead. In fact, the S&P has formed H&S pattern in weekly pattern and ongoing to break the neckline. The first down target around 1100.
My opinion is I am still very bearish about the economy and stock market, we probably would have make new 2008 lows in coming summer time. Be careful folks, stay away from banking and financial stocks because they have long way to go(Going down). It seems most of the big banking and financial stocks would trade in single or teens in coming months.