Dow submarines below 13,000

8-16-07

What a rollercoaster.
The DJIA futures were looking sickly when I got up in the morning. Red across the board. It was apparent that Europe and Asia cause a case of the flu. The opening was tempered, and the market didn't start really running down until 11am EST. The bottow was reached at 1pm, and ran back ALMOST into positive territory. The DJIA started displaying some market leadership.

Forecast:
Near term, we move sideways to down. Any upside would be a bounce rally which will be short lived. More mortgages will be reseting Sept and Oct. The start of Sept will mark another opportunity for people to redeem their Hedge fund investments. Waiting at this point for another mortgage company to bankrupt AND still waiting on the first homebuilder. Housing will have a bigger negative effect on the economy than the Fed thinks it will. Expect the Fed to hold steady until their 9-18 meeting. DJIA might drop to 12,000 and eventually find support at 12,300.

Things to watch:
Retail indicators (CPI in particular)
Mortgage rates (hikes and people getting squeezed out)
Unemployment upticks
Indication of DEFLATION

Remember this thing took 6 years to build up, and driven primarily by housing. I would guess that 3 years of these house price gains were unreasonably linked to fair price. I'm also guessing that the velocity of this decline is 10x faster than the velocity of the price increases. The true economic bottom is 3-6 months out. Looking back, it might qualify as a recession.

Good luck out there.
Only thing I have right now is COP.
I'm hoping to profit if Tropical Storm Dean turns into a Hurricane. Could be good for oil/gas prices.