A 10 year chart of the SPY



I look at the chart and see $115 - $120 as strong support, I don't think it will be strong enough. 

I would argue that our economy is in far worse shape, from a structural perspective today than in 2002 - 2004.  I have mentioned that credit crunches, crunch economic activity and we are in for a pummeling.  That decreasing economic activity will lead to rising unemployment.  Given what I expect the level of excess leverage in the global financial system and just returning it to a normal level of leverage will contract the US economy by 15 to 20 percent from peak to trough and it will take five years.  I also have mentioned that mark to market accounting is going to wipe away many balance sheets unless something is done.

There is a price between $120 and $109 that if broken, we will see a decline as steep and long as third quarter 2003.  It is hard to argue that the market belongs here given the structural shape of our economy. 
Posted by Bradley Fluetsch at 8/25/2008 7:25 AM
Categories: Speculation
 

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