Monday, September 29, 2008

Global Chaos

As I write this the Dow is down 320 points, with gold UP $27.00. The FED is announcing yet
another massive USD liquidity injection. US Problems have clearly become Global.

With the historic volatility that the markets have been experiencing, FEAR is in the eyes of our leaders both in Washington and Wall Street. The Dow Jones Industrial average had notched triple-digit moves each day and for many, the question was becoming whether the U.S. government's bailout efforts, which caused an impressive rally on Thursday and Friday, would be enough to fight off a long-term move lower. The fact that the major indexes were trading below the long-term resistance of their respective 200-day moving averages suggested that there was a lot of work that needed to be done in order for the downtrend to reverse any time soon.

Voltatility continued this past week, as more changes were seen within financial institutions across the U.S. Goldman Sachs (NYSE:GS) and Morgan Stanley (NYSE:MS) changed their charters to become commercial banks in an attempt to stabilize their capital positions. A huge purchase of equity in Goldman Sachs by Warren Buffet after this news helped push Goldman a bit higher. Washington Mutual (NYSE:WM), a large thrift bank in the U.S., was seized this past week and purchased from the Federal Deposit Insurance Corporation by J.P. Morgan Chase (NYSE:JPM). This just added to the fear that seems to be spreading to investors across the country about which bank will be next.

Charts (NYSE, Russell, Dow, Nasdaq) are all trading below the 50 & 200 DMAs, indicating more downside.

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