Something Ominous This Way Comes

Please look at this chart of SPX. Pay close attention to what this chart is telling you. We are in at least a Bear Market territory now. CNBC was touting this as an "official" correction, but the truth be told, we are in a Bear Market. The 1410 support level on the SPX, which many, including myself, thought would put up quite a fight in breaching that technically important level, did so without nary a fight. It was like knife cutting through warm butter. That in of itself should tell you about the dire situation of our markets today.

On the daily chart, the SPX has formed and broken down from the head and shoulders pattern and it continues to get ugly. I will go out on a limb and say that within the next 3 weeks, we may see the breach of the August 2008 lows of 1380 in short order. Beyond that, it is anyone's guess but I would not rule out a full blown recession to a depression. We are in a deflationary environment, NOW! Forget about all the mumbo jumbo about inflation. If you don't believe me check out the TNX (10 year treasury yield).

No, the FED will not and should not intervene. FED is too late to the party and cannot help us now. We must go through this the old fashioned way and "purge" the system for all its fraud, smoke and mirrors, and greed. I anticipate that we will see at least one major bank fail. Could it be Citibank (C)? Could it be Wamu? Or better yet, and for those who read my blogs, know that I am rooting for the evil empire that is Country Wide (or Country Schnide) (CFC). I fully expect Angelo Mozillo to be in jail within the next two years. Greed at its best.

It is likely that the markets from this point on will get very volatile and only the most nimble and experienced traders should attempt to play in this market. Unless you are prepared to take 100% losses and perhaps more if you use margin, you should not play with fire.

All I can say is that the subprime related issues have not even touched the surface. We still have issues far beyond that in our financial system that will have global consequences. The credit market is contracting and breaking down, as evidenced by the emergency liquidity injection that seems to go on daily. http://www.tickerforum.org/cgi-ticker/akcs-www?post=17141.

It is also rumored that CFC (Country Fried) also borrowed heavily from Atlanta FED today to stave off the inevital but keep its sorry organization in business. Is it to prop up this stock so that Mozillo can continue to sell his 70,000 shares every two days? What happened to their cash reserves?

Things will get worse and possibly this economy may take years to recover. But at this juncture, we are definitely headed in a collision course with financial disaster.

By the way, the retailer's pump did not work today. It is because everyone can see through the hype and understand that when there is a record shoppers but they are buying 3.9% less than they did a year ago, that signals that the consumers are not able to prop up this market.

See you at SPX 1380.