OTC Stock Review Weekly Update For Monday, December 22, 2008
Past 5 daysDow
Nasdaq
Close Friday
Dow -25.88 at 8579.11, Nasdaq +11.95 at 1564.32, S&P +2.60 at 887.88
During the past week we had the Fed cut interest rates again but instead of saying to what rate it gave a range of between zero and 0.25%. On top of lowering the short term rates it said that it will continue to buy US government bonds which has of course been driving bond prices much higher. They do this by issuing a credit to the Treasury Dept, which in turn prints currency. The Fed is a private corporation made up of member banks and they let this financial crises happen.
The White House announced a plan to provide automakers with more than $17 billion and so far. It seems the market liked the news as it takes it off the front page of uncertainty and the current worry of the auto industry shut down can be put off a while at least. The funds won't ensure automakers achieve a successful recovery so the market will again show more concern in the future.
In several of the bear markets we have a good rally at some point which can retrace about 50% of the decline. The first decline is labeled A and the rally B and then comes the final decline C. You cannot know for sure until after an event but we may have completed A down and have started B up. None of these are annotated on this chart but the 50% level on the Dow is 10935. The Dow would first have to break above its trend lien and 50-day EMA as show on its chart later on.
This chart shows Dow from 1929 to 1933 and the first rally from its initial drop in 1929. It put in a strong rally back to its 200-day average before starting its larger drop and eventual start to recovery 3 years later. We may be in a similar situation now but the 200-day is at 11052 so seems unlikely we could rally that far. The main point of this chart is how much further the decline had to go after the rally ended and how many years it took. From the November low this year the Dow rallied 21% to the December high. We will soon know if we get our year end rally to top that or not.
Some low priced stocks to look at for a nice bounce are RELM, UNDT, COPI, AXMA, GMPM, NPWS, and IHSI. You might also want to keep an eye on AMEH.
AI
