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Super Dud Committee... Not Really....

Stock-Markets / Stock Markets 2011 Nov 22, 2011 - 03:08 AM GMT

By: Jack_Steiman


Best Financial Markets Analysis ArticleHaving expectations when you look at where we're at fundamentally makes little to no sense whatsoever. What was the super committee really going to be able to come up with when you break it down? We have the entire euro zone ready to go under, and many brilliant minds have been unable to come with any good solution. Why would they be able to? The structural problems are so deep that sometimes you have to throw your hands up in the air and say I give up. There truly is nothing we can do. We want to help, but maybe helping would only create deeper problems in the long-term, and that's something we all have to watch closely. Hopefully, there will be no more sacrificing the moment to get some relief for long-term destruction. Everyone seems to be more aware of that, but let's hope that they don't lose sight of it all when things get worse.

Desperate times often, and quite incorrectly, make the higher-ups do the worst possible thing just because they think they have to make a decision one way or the other. No one has to do anything even though the pain of the global financial crisis is so severe. They can let everyone take the pain over the coming years, and then move on with a new beginning somewhere down the road. We're all so impatient. We want the cure now, and that can make some people do bad things. Don't worry about the moment. Look bigger picture. Please keep the focus on the bigger picture boys and girls. We can't afford any more short-term solutions that lead to longer-term nightmares. Stop being political. So in the end, the super committee laid the egg. Not really their fault. Too many unrealistic expectations were thrust upon them, and they failed to come through. No shock! Now we can move on with what seems to be more inevitable. Europe looks to be going down. We can hope something appears out of the blue, but don't count on it.

Today we saw the repercussions of the committee's failure to come up with a solution to solve the problems abroad. The futures and markets sank in both Asia and Europe. We, naturally, followed their lead. There was nothing to save our markets. We opened down about 150-points on the Dow, and things only worsened from there. It was down nearly 340 points at the lows. Three hundred-point down days are not too unusual these days.

Sadly, they're somewhat the norm. The market closed off the lows due to some intense extremes at oversold on the short-term index charts. Those 60-minute charts were sitting at oversold for many days. That's quite unusual. It had to unwind some at some point. This allowed for us closing off the lows, but no one will say this was a good day for the bulls. It wasn't. A technically damaging day as Germany broke down out of its triangle. Many of our leading sectors did the same. We hadn't seen this type of technical damage in quite some time, so it should be respected for what it is; a change of character. If we lose 2520 and 1177 on the Nasdaq and S&P 500, respectively, we're in deep trouble. These are huge gaps that need to be defended by the bulls. But it's bad times for the bulls. Today sent a message. The bears are in control, even if we need to bounce some from oversold.

Protection. You should all be thinking about protection. Please take the time to talk to all of your fund managers. You all have some combination of 529's, 401K's, and mutual funds. You should speak with the managers of all of these funds, and ask them how much they're invested. What percentage of your cash is in during these bad times? What is your exposure to financial stocks, which should be zero? Don't hesitate to tell them to possibly lessen exposure. If the market blasts higher, you can always get back in. Maybe you'll be lucky and be able to get back in at much lower levels over time. In times of such massive risk, I would think lessening up on some of these funds would make some real sense. Do what feels right, but please think in terms of being somewhat more defensive. It can't hurt.

There is so much still unknown. How deep will this selling ultimately be? How long will this bear market last? Are we destined to test the October lows at S&P 500 1074? Break those lows?

We really don't know all the answers to these things. We have to let things unfold in the days, weeks, and months ahead. If the euro-zone countries start to go belly up with no bail outs, which I hope there aren't any, then things will get very nasty very quickly. You would all be pretty shocked by the depth of the selling and how fast prices could unwind to the down side. Don't try to be a hero and guess where the bottom is. All we can do is take the proper bottoming stick, and get involved somewhere down the road. On top of that, it'll probably take a positive divergence on the daily index charts to get the market to put in a real bottom and not just one that's good for a bounce, even if it's a good one. You should all be thinking about being defensive and not taking the offensive approach for now.

We know 1177 is key for the S&P 500, and 2520 is the same key with regards to the Nasdaq. A blow through these levels with force will cause a big push down. We have to take things in as we find out the news that is coming in from Europe. We then look at key support levels. If those broken levels are back tested properly on rallies, we can short some. Only risk to shorting is if the fed gives in and creates the next QE program that blasts the market higher short-term only. We take things day to day for now and adjust as things move along. There is no other way to play properly.



Jack Steiman is author of ( ). Former columnist for, Jack is renowned for calling major shifts in the market, including the market bottom in mid-2002 and the market top in October 2007.

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© 2011

Mr. Steiman's commentaries and index analysis represent his own opinions and should not be relied upon for purposes of effecting securities transactions or other investing strategies, nor should they be construed as an offer or solicitation of an offer to sell or buy any security. You should not interpret Mr. Steiman's opinions as constituting investment advice. Trades mentioned on the site are hypothetical, not actual, positions.

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