Stan Weinstein was the guest for Market Monitor on Friday’s Nightly Business Report. In his previous interview back in September 2007, Weinstein warned of a potential bear market if we penetrated 12,800 on the Dow. If you follow the link, you can see a long term chart showing the significance of that level.
Of course, we did break through that level and we are in a bear market. So what about now?
Weinstein thinks that we are going through a bottoming process but it isn’t finished yet. He is still bearish, long term, but thinks that we may have hit a low short term. If the market can close above 9,800 he expects a rally. If it closes below 7,800 he expects it go even lower:
A few readers asked me about the difference between 150 and 200 day moving averages. Weinstein mentions in the interview that he uses the 50 and 200 day moving averages, with the first for short term trading. There really isn’t a magical number. A long term moving average should represent the long term trend. Since there are approximately 200 trading days in a year, it makes sense to follow the 200 day moving average. But anything close to that level is fine as long as you stick to it.
If you are familiar with the stage analysis that Weinstein applies, he thinks that “select regional banks”, airlines and a few healthcare stocks are in stage 1 or basing. That doesn’t make them automatic buys, yet. They have to finish basing and break above with a volume burst. The financial sector has gotten clobered but the regional banks are different than the investment banks like Goldman Sachs (GS) and JP Morgan (JPM).
Worldwide Bear Market
Stan also mentions that this is a global bear market with stock markets across the world being mauled. I would go beyond that and say this is beyond a bear market like the one we saw in 1970 because everything is under forced liquidation, gold, oil, commodities, bonds, REITs, etc.
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