Insecurity Still Pervades Wall Street

March 28, 2008

To end the week, the market left a sour taste in the mouths of investors. Faced with continued worries over the state of the economy and the ability of the financial markets to weather the storm, the market used today to give back some of the gains that it has made over the past two weeks.

Stimulus packages, lowering interest rates, infusing liquidity into the banks themselves helps to an extent, but won’t solve the credit problems that currently exist. The free market has to work its problems out, and in order to do such, it is best if we take a more “hands-off” approach to doing things. Yes, there may be more BSC catastrophes out there, but to keep propping up the financial markets artificially, only delays the inevitable. Let us first say though that we are not preaching a ‘gloom-and-doom’ scenario, instead to the contrary, we may be able to get ourselves out of this mess quicker if we let the cards fall where they may, pick up the pieces, and start moving forward once again. By using governmental intervention to preserve the market at its current levels, may help for a time, but we will end up back to where we were the past three months – namely January’s lows. Those lows may in fact be the bottom of this market, and we are inclined to believe so, but we need to see the financial markets come to a free-market/laissez-faire solution to the bear market we currently find ourselves in.

Let’s review the charts…

Pessimism continued with its ways today, as the NASDAQ, slipped below the 50-day moving average on light volume. Whether this is just a pullback, in the latest attempt at a bull rally, remains to be seen. Protect your capital at all costs.

CLICK HERE FOR THE NASDAQ CHART

S&P dropped below the downward trend line (or the descending level of resistance). While the gains from the past two weeks look impressive, the losses from the past three days put a damper on those gains.

CLICK HERE FOR THE S&P CHART