Friday, December 3, 2010

Heading for the Exits

Just as everything looked so good, reality comes back to haunt us.  The long awaited monthly jobs number was reported this morning and much to the chagrin of market bulls, the number was a bust.  The unemployment rate again rose to the Springtime highs of 9.8% and a mere 39,000 net jobs were created in the last month.

We had been anticipating the stock market's test of the highs.  Normally, this is a three-week test of the high but with the Thanksgiving holiday last week, perhaps the market timing got a little displaced.  Seldom do things in the market play out "exactly" as one would expect.  Gee, the  market would be no fun if it were that predictable.  But this week, stocks played catch up, exploding sharply to the upside but still not getting above the 11,400 level.  It came close but whoops, not today.

It appeared that the market could take out the highs as pre-market trading was flat to positive, but then, the big number hits and markets sharply reversed course.  The Dow was up nearly 50 but now is down nearly 50 with normal trading still yet to begin.  It appears that we are going to fail this test of the high.  It is an Intermediate test of the high so the down draft could last for several months.  In fact, such a well defined test of the highs could mark a major top.  I can't see the Dow ever getting to 12,000.  While it may bounce around between 10,000 and 11,000 for another year or so, all signs indicate that we are going to go down and go down hard.  I predict a Dow 5,000 or even lower after 2012.


You know how that movie played out.  The mad scientist played around with genetics, making it certain that the animals couldn't breed on their own and all things would be kept under control.  Well, our Federal Reserve and other central banks around the world have been tinkering with nature and the outcome is going to be just as deadly.

With this in mind, you are going to want to position your portfolio VERY CAREFULLY.  There is a real danger of not only a major stock market collapse but also a fleeing from the dollar and treasury securities which could cause a major panic around the globe.  If you wish to immunize your portfolio against the potential hazards that are clearly evident, contact me for a free consultation.

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