Recent Market Patterns Suggest An Extremely Severe Downturn Is On Its Way
Julyy 27, 1012
With the global economy likely headed for another recession, central banks are still attempting to step up their probably futile effort to stop the downward tide by trying to boost stock market prices. Although we are generally not believers in conspiracies, it does seem likely that the Fed, late yesterday (Wednesday) afternoon, leaked the possibility of an imminent move toward more ease to its favored reporter at the Wall St. Journal.
Not coincidentally, the report came out just as the S&P 500 was breaking below the upward trend line in effect since the June 1st bottom. To add icing to the cake, ECB head Mario Draghi, a few hours later, announced the ECB’s intention to do everything it could to keep the Eurozone together.
The leak by the Fed was most likely a signal that the move toward more ease would come about at next week’s FOMC meeting, as anything less would meet with severe disappointment by the market. By the same token, the ECB, too, will now have to follow up with something more concrete than Draghi’s general statement.