Hi All, I havent posted for a while but have been trading. With the close on the XJO below 5600 today I have confirmation of broken long term bull market support. It was oversold at 6000 IMHO last year but its hard to pick a top in a bull market once the masses get involved. NOw people are swinging around to the reality of a squeeze on credit/money which will in my opinion restrict investment globally. As this will fuel inflation at a time when reserve banks are lowering interest rates I think the coming year will really test not only the reserve banks' abilities to support economic growth thru the adjustment of interest rates but also test the financial system as it stands today. I dont see how consumers can continue to 'support by spending' at a time when all debts are being called in (or about to be - we just havent seen it yet) and inflation of all goods a services eat up consumers' spending money. Inflation will be what causes the US to sink deeper into the financial stink - Lowering interest rates will add to the problem in the long run. THe US needs to bit the bullet and jack up interest rates to 5 or 6%. That way the people that can affordto take on debt will and they will repay it back with the usual average number of defaulters. All the people that really cant afford to borrow wouldnt and thsu the financial system would nt be taking on risk it shouldnt. Having said that - they already have and so it is going to hurt until they write off all their subprime losses present and future, help those that have impossible loans to be able to repay their debt and lend at a reasonable rate to those that can afford to service that debt. So I cant see the US reserve heading in that direction any time soon therefore we will see more pain over the year - a long drawn out affair due to even more rate cuts by the various feds. Once the Euro and UK rates start to drop the big falls in the equities markets will come. I see 5200 as next support and 5000 after that. I was really hoping for a bounce and a continuation of the bull market but until a cple more years have passed for cina and india to take up the slack, we will see more downside. THats not to say there wont be bounces up, but ultimatley, down trending. Cheers
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