Downside Acceleration

Over the past weekend, I was reading about the severe winter storm that was forecasted to blanket the East Coast. It seems that part of that storm took direct aim at Wall Street and sent the bulls heading for cover as the month of March started out on another sour note.

The major indexes got clobbered again and are now at levels last seen in 1996. The S&P; 500 barely hung on to the 700 level, but there’s a good chance that it will be taken out. That leaves most people wondering as to “how low can we go?”

In the past, I have quoted those who have better skills in the fine art of forecasting than I have. Some, whose opinion I value, have predicted the bottom in the S&P; 500 to be in the 600 to 650 range. Much to the chagrin of the buy-and-hold folks, we’re almost there.

In December, in my blog post “Short-term Bullishness,” I referenced an article by Mish Shedlock who, based on his assessment of the Elliott Wave Theory at that time, pointed to a potential bottom of 600.

While my guess would have been for this bottom to occur either late in 2009 or in 2010, only 3 months after the above posting, we are within striking distance. It’s simply a sign that, economically speaking, things have deteriorated not only at a rapid pace but also with great magnitude.

All bailout programs have failed to stop this trend, and I have repeatedly voiced my opinion against pouring tax payer money into bottomless sinkholes like AIG and many others. It will take time and, unfortunately, more destruction of assets before a bottom will manifest itself.

Fortunately, by simply following trends, we will be in a position to take advantage of such a turnaround whenever it occurs.

About Ulli Niemann

Ulli Niemann is the publisher of "The ETF Bully" and is a Registered Investment Advisor. Learn more
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