If my magic time machine pencil is working right, this may put the bottom at about 500 for the DJIA, if it is reasonable to roll a market back to the beginning of the offending acceleration when said acceleration really took hold. If the rollback is to be when regulation was first seriously strangled and offending acceleration was given birth, then the bottom for the DJIA may be more like 200. The corresponding SPX rollbacks are about 20 for DJIA 200 and 100 for DJIA 500. In any event, economic conditions and general levels of confidence of any sort in any thing mean we still have quite a ways to go to get to market bottoms.

Posted by: stumblewire | Nov 21 2008 15:48 utc | 1

A pullback after a double-top can be just as big as the middle collapse - which was at 7500 DJI, the current situation. The real question is now if it'll be a pullback of the size of the first collapse (12000/7500) or the second one. Basically, it will go down to 5000 in the short run; whether it'll go as low as 1000/1500 in the middle or long run is another question.
Coincidentally, 1000 is roughly the situation of Dow before the madness of Reaganomics pushed it into the stratosphere.

Posted by: CluelessJoe | Nov 21 2008 16:23 utc | 2

only, technical analysis is crap. despite having mellowed a bit on methods that try to use system-theoretic concepts (none too rigorously), looking for pretty 2-d pictures is still crap.

Posted by: ...---... | Nov 21 2008 16:39 utc | 3

If you want to make it really frightening, switch that picture to a semi-log chart.

Posted by: mats | Nov 21 2008 17:23 utc | 4

I have been watching charts some, and haven't seen this as clearly, probably because the charts I do see are of the log variety which do NOT show the formation dramatically. I always wonder, how and who determines that log equation which conventiently shows a longterm uptrend regardless of how things are going in the reasonable investment timeframe?

Posted by: DonS | Nov 21 2008 17:36 utc | 5

I have to admit that I have a bit of a problem with the technical crowd. Prediction seems to rely solely on the shape and direction of the charts to the exclusion of very real influences, such as human psychology, current events, etc. Given that the history of market trends is comparatively brief, I can't see how this analysis can be reliable.

The day after a meteor strikes the Earth and wipes out most of the life on it, I expect that we'll be reading some analysis by a technician that says we're in a head-and-shoulders bottom.

It sometimes almost seems that we're having a discussion about predestination.

Posted by: Obelix | Nov 21 2008 18:32 utc | 6

Paulson Was Behind Bailout Martial Law Threat

Senator James Inhofe has revealed that Henry Paulson was behind the threats of martial law and a new great depression prior to the passage of the bailout bill, having made such warnings during a conference call on September 19th, around two weeks before the legislation was eventually approved by both the Senate and Congress.

As we reported at the time, on October 2, Democratic Congressman Brad Sherman gave a stunning speech on the House floor during which he decried the fact that, “Many of us were told in private conversations that if we voted against this bill on Monday that the sky would fall, the market would drop two or three thousand points the first day, another couple of thousand the second day, and a few members were even told that there would be martial law in America if we voted no.”

A few days before, Rep. Michael Burgess also told the House, “Mr. Speaker I understand we are under Martial Law as declared by the speaker last night,” referring to a temporary suspension of the rules and procedures of Congress by its leaders so that a bill can be passed quickly.

But the origin of the most dire warnings about physical martial law in America, to which Sherman was likely referring, has now been exposed.

Speaking on Tulsa Oklahoma’s 1170 KFAQ, when asked who was behind threats of martial law and civil unrest if the bailout bill failed, Senator James Inhofe named Treasury Secretary Henry Paulson as the source. “Somebody in D.C. was feeding you guys quite a story prior to the bailout, a story that if we didn’t do this we were going to see something on the scale of the depression, there were people talking about martial law being instituted, civil unrest….who was feeding you guys this stuff?,” asked host Pat Campbell.

“That’s Henry Paulson,” responded Inhofe, “We had a conference call early on, it was on a Friday I think – a week and half before the vote on Oct. 1. So it would have been the middle … what was it – the 19th of September, we had a conference call. In this conference call – and I guess there’s no reason for me not to repeat what he said, but he said – he painted this picture you just described. He said, ‘This is serious. This is the most serious thing that we faced.’”

Inhofe said that Paulson told members of Congress the crisis would be “far worse than the great depression” if Congress didn’t authorize the bill to buy out toxic debt, a proposal “which he abandoned the day after he got the money,” added Inhofe.

Inhofe is referring to the controversy last week when it emerged that the bailout money was not going to buy up toxic debt but instead Paulson, the former CEO of Goldman Sachs, had pulled a bait and switch and ordered the money be injected directly into banks.

Senator Inhofe has slammed the secrecy surrounding the destination of the bailout money, saying that Hank Paulson could have given it to his friends and that the “blank check” must be cancelled now.

Inhofe is now trying to rally support for a freeze on what’s left of the initial $350 billion of bailout money with his “roll back the bailout” proposal, which will also require an affirmative vote on the part of Congress to approve Treasury’s plan for the remaining $350 billion. Watch the clip from Inhofe’s interview below:

Inhofe: Paulson Used Scare Tactics To Push Bailout

Tangentially related, this clip on HBO's Real Time with Bill Maher; I'm not a big fan of his, but watch what he says...

Daddy, is it 'economic terrorism', yet?

Posted by: Uncle $cam | Nov 21 2008 19:28 utc | 7

uncle

about maher, i feel the same - i find him quite repulsive- libertarians of his sanctimonious species make me want to spew

one stateùent does not a hero make

Posted by: remembereringgiap | Nov 21 2008 19:40 utc | 8

generational inexperience and memory loss? (a.k.a. history repeats itself)

question: what is an exclusive common denominator to america’s last crisis (stock market crash, depression, world war II) and
america’s current crisis (markets crashing, recession/depression [tbd], world war III [tbd])?

answer: in the years preceding these crises something rare occurred on an extended-long-term basis (14 years: 1917-1931 and 12 years: 1995-2006, respectively).
america’s legislative watchdog and protector - congress (both the house and senate) - was majority (controlled by)...
...the republican party. (note: and it never occurred - but for much shorter terms of 2 to 4 years - at any time in between the 2 crises. hence - the title i have chosen.)

Posted by: darkcloud | Nov 21 2008 19:56 utc | 9

@darkcloud - you are on to something. History repeats itself, first as tragedy, second as farce.

Posted by: b | Nov 21 2008 20:28 utc | 10

This simple chart http://2.bp.blogspot.com/_H2DePAZe2gA/SSdyJWdTXJI/AAAAAAAAGfA/kJLhdrnRHaI/s1600-h/stockmarketcorrect.gif>here via http://jessescrossroadscafe.blogspot.com/>Jesse of stock market corrections (DOW) since 1900 puts things in visual perspective and also hints at a bottom being far off.

Hints, as reading the tea leaves - dregs and detritus - resting in the casino-capitalism-cup (TM) is a speculative exercise.

Posted by: Tangerine | Nov 22 2008 12:04 utc | 11

@ 10: thanks, b. i'm flattered.
@ 2: cj, i feel the same about reaganomics. the birth of the reaganomics ira is now the near-wiped-out retirement accounts of most americans.

simple math: first baby boomers in 1946. traditional retirement age: 62. add together you get 2008.
next, financial wizards/cardsharks anticipate the huge market peak coming for the first boomers to tap into (around 2008). stock market high in 2007 arrives. the wizards and swindlers smell blood in the water, sell-off and take profits at peak market value.

and all of the joe schmoes sitting on retirement accounts long-term in the markets just got wiped out 40-50%.

i call this "the first great scam"

Posted by: darkcloud | Nov 23 2008 8:38 utc | 12

It was inevitable in the dog eat dog capitalist society most of us have chosen to inhabit that the peak point in the accumulation of the largest group of 'wealth generators' in the history of our species, that an event would occur which would reverse the distribution of that wealth.
It doesn't even take a conspiracy. With a honey pot that big and the huge number of unethical greedheads who had access to the wealth containing infrastructure, inevitably many would successfully chip and peel away at the retirement savings.

This is no instant overnight event however. Right from the time that baby boomers have been accumulating their 'nest eggs' continuous attempts have been made to legally sequester it. As the various schemes suceeded and then petered out, the greedheads applied pressure on regulators to derugulate. To legitimate more efficient ways of grabbing the stash. ( see Phil Gramm)
Their contacts and their singleminded focus on the issue meant that the divergent group known as 'baby boomers' - putative patsies, wouldn't stand a chance of effectively countering the strategy of the raiders who had laid siege to the honey pot.

Of course putting it in those terms implies that the raiders always had a conscious goal of seperating the baby boomer retirees from their retirement funds.
Nothing could be further from the truth really. The comparison is the same as imagining that each piece of abrasive on a strip of sandpaper is carefully calculating how much paint it can hope to strip off the area of wall it comes up against and then envisioning the result, a wall completely bereft of sealant.

You see we live in/have constructed a system which is designed to reward the greediest least scrupulous. So every morning greedheads large and small, head to the office planning new ways to get their quota of paint flakes, but rarely if ever looking up at the 'big picture' of the wall becoming naked and unprotected from the weather.

If they ever did look up from their little alottment of wall they would see that they, just like nearly everyone else, will be greatly harmed by all the abrasives combined endeavours.

Without stretching the metaphor too much further it would be fair to say that applying a new coat of paint(cash) won't fix the problem. The abrasives will find a way to sand that off sooner or later.

The solution must lie in reducing the numbers/power/independence of all the sanders(greedheads).

In other words making a radical change our society's rewards and incentives. Not necessarily banning sanders but finding a way for them to have to confront the big picture and making them recognise that they are a fraction of a much larger whole.

Posted by: Debs is dead | Nov 23 2008 9:46 utc | 13

@ 13: interesting - thanks for a reply. per your reply:

"Right from the time that baby boomers have been accumulating their 'nest eggs' continuous attempts have been made to legally sequester it. As the various schemes suceeded and then petered out, the greedheads applied pressure on regulators to derugulate. To legitimate more efficient ways of grabbing the stash. ( see Phil Gramm)...Their contacts and their singleminded focus on the issue meant that the divergent group known as 'baby boomers' - putative patsies, wouldn't stand a chance of effectively countering the strategy of the raiders who had laid siege to the honey pot....of course putting it in those terms implies that the raiders always had a conscious goal of seperating the baby boomer retirees from their retirement funds"

now remove the word "always" from your last sentence Debs, and i see strong commonality in our 2 posts per your words above. what i did was pull a snapshot on what i (perhaps mathematically conveniently) consider to be the most painful of these scams, a pain which i believe will be of the very greatest, and will continue for some time. at some point, these "greedhead" (nice term - thanks) victims are going to be told en masse that the market is too risky for their retirement and they should not invest there.

too bad they weren't told that from a much earlier point in time. before the raiders looted them. anyway, God bless reaganomics and the birth of the "ira", eh? a concept which looks to someday remind many americans of their life's greatest financial heartache and loss.

Posted by: darkcloud | Nov 24 2008 1:40 utc | 14

My IRA is just fine, thanks. It was up 67% last year.
The secret?
How can everyone expect to make money doing the same thing?
Problems with technical analysis?
In the markets you make money doing something in an unconventional manner.
You must measure prices in time and remember patterns of human behavior.

Posted by: paracielo | Feb 4 2009 20:55 utc | 15