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Market rallies won’t hold up, watch the sell on bad news

Posted by Adrian on March 18, 2009

Technically the markets are very oversold, so rebounds can be found. But in light of the snowballing fiasco that AIG will turn into (bail outs and bonuses been paid with taxpayer monies). Ben Bernanke’s whimsical assumption that the US will pull out of recession in 2010. The loss of confidence in Treasury Secretary Tim Giethner who could get pulled the shortest straw very soon. The bank/toxic waste bail out (yes again by the tax payers) could become another one for the waste basket bin, as congress will now implode. European law makers will watch in earnest if the whole thing flops on it’s arse in the US, only because the bailouts are backfiring, as bankrupted giants like AIG and Citigroup start to pay out the top management as the businesses will at some point breakup. A delayed syndrome of free market purging thanks to terrible decisions by policy makers, all backfiring in an amusing and tragic way.

So if you charting the main US indices and looking for some indication where the market is going, say the Dow and S&P500; you can see a trading range occurring which is quite tight. But one thing is showing a concern for a pending sell off, is the rise of the market in Jan 2009 from it’s Nov 2008 lows and the new year selling all the way into March 2009. Although now an attempt for the market to see a bottom in March 2009 could be premature. The RSI index shows a similar patten just above 50, mirroring the 50+ the Dow and S&P 500 in Jan 2009 (before the sell off).

If you have access to charts you can tweak the indicators to be more precise, but it shows that a sell is on the cards, that could hit the lows early in March 2009 on the Dow and S&P 500

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