Ensign Software appreciates the market insights provided by Larry Pesavento in this timely newsletter.
Pesavento: ‘It is becoming more and more apparent to people around the world that something is happening that is affecting the economies of the world. What started in Europe and spread to Asia is now prevalent across the globe. Commodity prices are beginning to look very weak and have the potential to drop a great deal more in the coming weeks. The S&P cash index on a weekly basis looks very reminiscent to 2008. Please take a minute and look at the weekly chart and compare the 2008 area with what is happening now.
The market made some type of the bottom on August 9th but has gone absolutely nowhere. It is at such a critical level now that it would take very little to turn it to the downside i.e. 2008! The banking index is looking particularly vulnerable. Bank of America looks so bad that if it goes below $5.90 a share it could be the next Lehman Brothers.
The next significant cycle is due on October 10. Alas, five cycles that we had this week occurred on the new moon, but we had expected the market to rally much stronger than for just two days. Should the market gap down on Monday, October 3rd it would be the potential for something quite sinister. Historically it was October 2, 1987 that started the market down into the crash of October 19, 1987. Look at a Chinese stock market which was supposed to pull us out of the doldrums along with the rest of the world and one can see that this market has been bearish for several months and is increasingly looking more bearish.
Copper which has been a good predictor of economic trends looks very suspicious like 2008. Here again we would suggest you look at the Copper chart and watch what will happen if Copper goes below three dollars a pound.
Below three dollars a pound suggest much lower prices in Copper and most probably another recession or possibly worse. I’m not trying to be a doom and gloom advocate. I’m just saying that the charts on Copper in the emerging markets, Europe, and Asia are all looking very vulnerable.
Last week on Friday we saw the demise of one of our former great companies. Eastman Kodak has been decimated over the past years. Eastman Kodak was one of the great stocks of the 50s, 60s and 70s but in recent times through mismanagement and poor planning has gone kaput. It is now trading for pennies on the dollar, down 60% on Friday alone, and facing bankruptcy. It was interesting to listen to reports on CNBC about how some major funds have made this their largest holdings since June. Just looking at a price chart would make one wonder how this could come about. During the 2000 bull market all stocks were going to triple digits and had no earnings and no sales only to be taken to the woodshed on the way to bankruptcy in 2003. Let the charts tell you where things are going. Don’t believe anyone. That includes me. Defy human nature and do the work yourself and learn how to read a chart because that will guide you through the maze of misinformation that we listen to each day. Keep in mind that during the great depression of the 30s, 17 of the 30 Dow stocks went bankrupt!’