Technical outlook for this week – expected snap back rally in progress

The Dow weekly shows the snap back Bollinger potential for this week – it is the 9300-9500 area. In any case, we get there (likely) as massive short covering will do, the job markets will have recovered 20% from the lows on Friday. That’s a massive move reflecting a 38% retracement – even right now it is substantial. In any case, we had a capitulation low so far which might/will be retested and even brought to slightly lower lows within 3-4 weeks. Some indicators and price patterns do not signal the final point reached even for this leg. The best case would be a plain retest of the Friday lows. This week will be an inside week of some magnitude but we are just starting earnings season and the focus will turn from financials to the earnings of the non-financial corporations. We very likely might test the 7500 area for the DOW before a longer lasting corrective wave up may start.

We had reached almost 10 times earnings at the low, which will medium-term be a benchmark to watch, since any earnings above are not deserved in deep recessions. The humongous bailout of $4 trillion in Europe and America for now cannot be digested easily if at all, since more pain is to come. As the regular industries, contraction will cause more losses for banks and the unfortunate sizable rising number of job losses.

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~ by behindthematrix on October 13, 2008.

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