Crash Watch Update

By: M.A. Nystrom | Wed, Sep 20, 2006
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Since I issued the crash alert on Sunday, there has been very little net movement in the broad market, as represented by the S&P 500. This was to be expected, since everyone is waiting around for the Fed announcement on Wednesday. However, we have seen a good deal of volatility, as traders take their positions before the announcement:

Monday saw the market climb all the way back to its May high - the level represented on the chart by the top red bar. The market had previously tested this level on Friday, and both times prices were repelled.

The second red line represents Monday's opening price. As you can see, prices have been all over the place but have ended up right about where they started. (Actually "all over the place" is a relative statement - the total range has only been 12 points - under 1%.)

But tomorrow (Wednesday) at 2:15 is the moment of truth. The Fed will make the Big Announcement that free market capitalists around the globe are holding their collective breaths waiting for. Chances are the "Announcement" will reveal nothing unexpected. Nonetheless, all hell will then break loose and the pent up energy in the market will explode - in one direction or the other.

As I made clear in my last report, my bias is to the downside. However, I want to reiterate, if prices do move up, they could very well keep going for quite some ways, so beware!

Today's Dog

Stock prices are leading indicators. In my last report, I showed you the breakdown in Ford's chart. Today, it was Yahoo! that fell over 11% in one day, as the slowdown works its way through the economy.

[Yahoo!'s CFO] Decker said that softness in auto and financial advertising was having an effect and that it was uncertain if this was just a one-quarter phenomenon or part of a broader trend.

This is the question, I think, that the market will wrestle with tomorrow. Is the slowdown just temporary, or are we headed into a recession? The stock market will answer that question for us, so stay tuned!

As I always like to say - the best things in life are free. I will have a complete recap of this week's action, and my predictions for the future for my subscribers at Best of all, subscriptions are free!



M.A. Nystrom

Author: M.A. Nystrom

Michael Nystrom

M.A. Nystrom is a private investor and consultant currently living near Boston. He earned his MBA from the University of Washington with a specialty in International Marketing. Following his retirement from the US securities industry, he picked up the hobby of web design, a trade he now plies at his big-picture investment oriented websites and

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