Technicals Point to a Market Going Lower
Thursday January 17, 2008
Market technicians work with charts and statistics to predict trends, some think it is voodoo and others think it is hogwash. One noted technician with a track record for being right more often than wrong -- says the current signs point to a significant move lower in the S & P 500.
Some time last summer I discovered CNBC's "Fast Money". It is the fastest growing show in the cable news genre. They celebrated their one year anniversary on Tuesday, Jan 15 2008. Since discovering the program the marvels of the DVR have allowed me to watch on a daily basis. While not every call is correct, they do pretty well in their analysis.
Carter Worth is a senior market technician at Oppenhiemer and a frequent guest on Fast Money. He has made some great calls, most recently bucking the consensus of opinion of the Fast Money traders by forecasting the downward move in Intel's stock. On Jan. 16, 2008 Carter Worth presented a chart that made a case for the S & P 500 average to break lower. He described the technical indications as ominous.
My source for legal information in the Dallas Metroplex tells me that at least one and possibly as many as three firms with contracts to produce goods and services has been forced to file bankruptcy due to an inability to secure operating capital to fund the day to day operations of their businesses. The nature of the proceedings prevents revealing details.
It seems that the cottage industry of flipping houses that has proven to be a disaster for anyone related to the housing and financial industry has the folks who work in bankruptcies working over time. The lure of easy money played a large part in the burst of the bubble. The ARM or adjustable rate mortgage allowed for multiple flips to take place simultaneously. It made the cost of the financing relatively cheap. The business model was simple. The initial low rate and the two or three years before adjustment would surely be enough to buy, renovate and resell the property at the much higher price. The entire transaction could be completed before the rate move and a profit was made. This profit could in turn be used as the down payment to buy more properties to flip. It seems that some speculators with easy access to mortgages, shall we employees of some of the more aggressive lenders, may have had as many as 15 - 20 flips in the pipeline at one time when the bubble burst.
House Lust: America's Obession with our homes