by Jack Lee
Far be it from humble me to say I told you so, but in the case of Bob Brinker I think I will make an exception. As most of you know Mr. Brinker is a financial talk show host on AM radio called Money Talk. Bob and I disagreed when he said the bottom of the market was near…that was back in March of 2008.
I’m reposting my original article and you tell me how I did forecasting the financial future…
For those of you who play the stock market you may be interested to know that Bob Brinker who publishes a newsletter called Market-Timer and is a popular weekend radio talk show host has declared the market is at a bottom and now is the time to buy!
I could not disagree more and I’ve stated my reasons earlier and I will go over some of them again in a moment. His long term model looks reasonable, but many questioned his call to buy when the SP was at mid 1400 level. It’s now at 1295. Brinker didn’t call the credit crisis and housing meltdown correctly and I did. I also called the current slump we’re in and he missed that too. Now I see a lot of red flags out there and I believe the market is going to drift towards the low end of 12,000 and possibly break into the high 11,000 on the DOW.
Take a look at the chart above and you will notice that we formed resistance in the area of 12025 in the recent days and twice that point of resistance was violated substantially. Of course one might argue we’ve formed a tripple bottom and it’s all up, up, up from here (see the M formation at the end of the chart). However, that would be short sighted and if you will notice that tripple bottom is within the range of the downward trend lines. We’re punching through the 3rd and quite possibly the last resistance point at this level. This is usually is a sign of a break thru to a new lower level of resistance. That new level hasn’t exactly appeared on the radar yet, but it appears to be forming. My best guess is we’ll see something on the DOW around 11925 soon.
Now lets talk momentum. Momentum reflects sentiment and with good news the market perks up and thats great, but with bad news days the market reacts with more conviction. If you look at the highs and lows since mid Oct. you will note a fairly wide top and bottom channel. Wide swings tend to indicate the jitters in the market place and the overall decline line as reflected by the 50 day moving average shows continued sell off and at this point I don’t see a leveling off as one would expect with a bottom forming. I don’t know where Brinker is getting his optimism; it certainly is not from a technical analysis.
So, recapping what we have in the chart is anxiety, bearish trend on fairly high volume, a resistance point that was penetrated with conviction and both fast and slow moving averages headed south, a further reflecting a bearish trend, In other charts you might want to examine the MACD, OBV and Bollinger Bands, but the conclusions will still be consistent with this more generalized picture.
Next week will be confirmation that we are headed to a new lower level if the DOW continues to track as it has this week and that will NOT be a very good sign for what Brinker is touting as a reversal at hand. Next week has to close out higher than our close this week or Brinker will have some splainin to do!
Several things of concern now is the continued fallout of the subprime mortgages (liar loans), unemployment numbers that are growing, but still don’t reflect the true picture because many people have dropped off the stats haven given up on finding employment, sharply rising food costs, high energy costs, slumping home sales, high repo’s in both cars and homes, declining consumer confidence, low prime rate interest trap that has too little room to manage money supply and stimulate market, weak dollar (thats a mixed bag) and now the horrible decision by the Bush Adminstration to cut checks to about 250 million Americans that is both too little and too late and will have little or no impact, except on our deficit. (Milton Friedman agrees with me) Speaking of debt, in Fiscal Year 2006, the U. S. Government spent $406 Billion of your money on just interest payments to the holders of the National Debt. We’re 9.2 trillion dollars in debt!
The average American isn’t in great shape either. We don’t have any savings, in fact most of us owe money, so the overall picture is we have a negative average worth. This is not how we stave off a recession! The money doled out by the government now under the pretext of a stimulus package will likely go into savings as consumers prepare a last minute stand against darker days ahead.
My advice to the consumer is to prepare for what could be a very deep recession. The DOW could go down another 1500 points quite easily and when it does, it will usher in higher unemployment, lower productivity and stress banks that have made so many bad real estate loans. We’re going to be facing a pretty rough time of it and doubt we’ll emerge from this recession for at least 2-3 years.
If Brinker misses this call I think I will quit listening to him. He is an arrogant person anyway and if his advice is not even as good as my own, then what’s the point?
For more information I suggest this site: http://www.washingtonpost.com/wp-dyn/content/article/2006/03/04/AR2006030400238.html