Thursday, December 27 2012
We got a real scare in the market today as the stock market fell more than 1% after Senate Majority Leader Harry Reid said that is unlikely that a deal could be reached in Congress before the Dec. 31st "deadline". This made us revisit our thoughts that we may be on a downward path in an eerily similar fashion to that in 2007-08 (see the graph immediately below and the first graph in our "Previous email"). Had the rapid fall continued, this could have been a grim day for the bulls. It is good to note that the pullback of the last 4 days has been on low volume.
On the positive side for the bulls, the SPY experienced what could prove to be a "one-day key reversal" where the market drops dramatically on a day following a short-term pullback, but recovers and closes above or near its open on that same day. Also positive is that the SPY broke its 100-day EMA, but recovered and closed above it (blue dotted line). Of course, this DOES NOT MEAN that the downward move is over, but it is a good sign.
We all know that the market's next short-term move is going to depend upon any progress (or lack thereof) in the negotiations in Congress regarding taxes and spending cuts and whether concrete progress is apparent in avoiding going over the "Fiscal Cliff".
It is impossible for any of us predict the outcome of these negotiations, so we will have to wait until these negotiations progress (or stall), and let MIPS decide what we should do.
Stock Market Crash of 2012 ???