This choppy action we've been seeing could be base building for a bottom or simply a bearish consolidation that will lead to lower lows...again, to early to say which, but the longer we see this kind of choppy action without a significant break of 1100 the more likely a bullish resolution becomes. Some people might be noticing what appears to be an emerging rising upward channel in the chart. I would be very skeptical of this channel being the beginning of a new sustainable advance off the lows that powers us out of the doldrums especially since there hasn't been at least 2 months of base building which historically has been a requirement for a market to recover from a crash. It's far more likely that the first move off the bottom that gets us out of the doldrums will be one like last September whereby it starts off with a surge seemingly out of nowhere and doesn't give you much in the way of dips to get on board.
A lot of work has to be done to restore confidence. I think this time around, unlike last summer, there will have to be a grand, final resolution towards PIIGS whether it's market friendly or not. We need to just get this over with because I don't think the market is willing to tolerate can kicking anymore after the 2 flash crashes we've seen. Next, the market needs to get a sense that emerging market countries are done with tightening and are switching to an easing stance. We already saw Brazil do this. We need China to follow. Finally, we need to see the US and some other developed nations have the balls to say fuck you to the rating agencies who are trying to be bullies by saying "austerity or else...." and take bold initiatives to stimulate job creation and clean up the housing mess which go hand in hand and doing so may entail rising deficits in the near term. If everyone goes austeric (is that even a word?) at the same time to keep the rating agencies happy it will soon become obvious that the slow or negative growth it creates results in a worse fiscal situation which would then result in further downgrades anyways.
There's a huge debate as to whether government intervention is effective or not. I think certain types of intervention can be effective and history has shown some instances such as Brady bonds in the early 80's, the RTC in the early 90's and TARP a few years back. If the Obama administration can come up with programs that will effectively stabilize and revitalize the economy in the long run at the cost of higher deficits in the short run they must try to implement them. I'm not talking about your run of mill Keynesian government spending that gives the economy a temporary sugar rush, I'm talking about creative solutions that could help resolve structural problems such as the housing market which is still a disaster. Housing affordability in the US is at an all time high and so I think attempts to stabilize and revitalize it can be successful. So far the attempts to stabilize have been a failure but that probably because the wrong approach has been taken.
But never mind what I think or you think. The market doesn't gives a rat's ass anyways. We should be able to see the signs when the market starts sensing that things are going to get better...right now that's not the case. Right now the market is suggesting to world leaders that they better get their asses in gear fast.
A lot of work has to be done to restore confidence. I think this time around, unlike last summer, there will have to be a grand, final resolution towards PIIGS whether it's market friendly or not. We need to just get this over with because I don't think the market is willing to tolerate can kicking anymore after the 2 flash crashes we've seen. Next, the market needs to get a sense that emerging market countries are done with tightening and are switching to an easing stance. We already saw Brazil do this. We need China to follow. Finally, we need to see the US and some other developed nations have the balls to say fuck you to the rating agencies who are trying to be bullies by saying "austerity or else...." and take bold initiatives to stimulate job creation and clean up the housing mess which go hand in hand and doing so may entail rising deficits in the near term. If everyone goes austeric (is that even a word?) at the same time to keep the rating agencies happy it will soon become obvious that the slow or negative growth it creates results in a worse fiscal situation which would then result in further downgrades anyways.
There's a huge debate as to whether government intervention is effective or not. I think certain types of intervention can be effective and history has shown some instances such as Brady bonds in the early 80's, the RTC in the early 90's and TARP a few years back. If the Obama administration can come up with programs that will effectively stabilize and revitalize the economy in the long run at the cost of higher deficits in the short run they must try to implement them. I'm not talking about your run of mill Keynesian government spending that gives the economy a temporary sugar rush, I'm talking about creative solutions that could help resolve structural problems such as the housing market which is still a disaster. Housing affordability in the US is at an all time high and so I think attempts to stabilize and revitalize it can be successful. So far the attempts to stabilize have been a failure but that probably because the wrong approach has been taken.
But never mind what I think or you think. The market doesn't gives a rat's ass anyways. We should be able to see the signs when the market starts sensing that things are going to get better...right now that's not the case. Right now the market is suggesting to world leaders that they better get their asses in gear fast.
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