Retesting 8200 once again
The bad news from this week just won’t stop. The treasury is centering the new TARP program of $700 Billion to start buying stock, rather than debt. Investors hated this action, selling off their shares in disgust and civil liberties groups around the nation are asking why the Federal Government should own private stock. American Express, a lender to many high income consumers got hit hard today as well after it was released that the company was seeking $3.5 Billion from the Federal Government citing that it could not find sources of funding to continue its lending operations.
We’re lucky today that the Dow was able to hold above its lows set in early October. Unfortunately at the current price the Dow only 82 points from the very critical 8200 support line. Trading in the last month has been very much contained by two horizontal support and resistance lines, one at 8200 and the other at 9600. 9447 is also a very important line but its recent weakness tells us that its strength is waning.
Without a bounce in the coming weeks it could be soon that the Dow falls through its recent absolute bottom of 7895 and push towards the tech bubble lows of 7500. This recession is obviously far worse than the speculative burst in 2002-2003 as this one is largely due to a deflationary change coming from falling home values. The entire US economy is reliant on credit for economic expansion, the United States has not had a trade surplus since 1991 when the economy hit recession and consumers stopped spending.
So for the last 17 years the only growth in the United States has come solely from debt. Without a credit market, the economy as it is today cannot expand nor be sustained. Its going to take far more than bailouts to get the US economy back on track.
