Just before the 1929 and 1987 market crashes key intermediate indicators appeared to be forming bottoms after several weeks of decline, and actually flashed preliminary buy signals in the process of rallies that lasted 7 or 8 days just before the market crashed. On Thursday and Friday last week, under circumstances of extreme financial fragility and political uncertainty, we began to see improvement on the market’s intermediate indicators that looks very similar to the early stages of any intermediate bottom, but is indistinguishable from how things looked just prior to the two greatest market crashes in modern history. Given the circumstances, I would not be willing to act on these signals at this time.
This market is now held hostage by the flow of events, and the players seem to feel that the world will either be saved or will come to an end over the next three days, ironically, coincident with the Jewish New Year- Rosh Hashanah. This is the time when, according to Jewish tradition, God created man, making this the anniversary of the birth of mankind. Rosh Hashanah is also the day when God judges each person for the year past. According to Wikipedia, “In Jewish thought, Rosh Hashanah is the most important judgment day, on which all the inhabitants of the world pass for judgment before the Creator, as sheep pass for examination before the shepherd.” How appropriate. Certainly, the next few days in the market will be a time when the sheep face Judgment day.
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