What We Learned Today: 17 September 2008

The markets reacted violently today to the news that the Fed is stepping in with an $85 billion bailout of American International Group (AIG). This news sent the major indices down another 4+ percent today and reaffirmed the strength of the current downtrend in the U.S. stock markets.

Many investors have been looking for a potential bottom in the markets, but since October 2007, both the Dow Jones Industrial Average and the S&P 500 have been in a downtrend. Unfortunately for everyone who owns stock, the downtrend does not look like it is anywhere close to being over. We'll go into this in greater detail in the video.

Everyone keeps talking about when/if the other shoe is going to drop on the market, and I think we are seeing evidence that the market still has a closet full of shoes left to drop. After hours today, we saw news that Morgan Stanley is in merger talks with Wachovia and that Washington Mutual is putting itself up for sale. Don't count on the troubles on Wall Street ending anytime soon.

Plus, we got bad news from the U.S. housing market today as we learned that Building Permits and Housing Starts fell to their lowest levels in more than 17 years. Eeeeeek! All of the economic analysts have been talking about the U.S. housing market being the key to recovery, and it doesn't look like we've found a bottom yet.

The market plowed right through a key support level yesterday, and is coming up on a key Fibonacci Fan support level which we will watch closely. A break through that long-term level and we could be looking at a prolonged continuation of the bearish trend. See charts below.

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3.25 Copyright (C) 2007 Alain Georgette / Copyright (C) 2006 Frantisek Hliva. All rights reserved."