October 15th, 2008

Redrawn "Line in the Sand"?

Today’s action surprised me! Didn’t think we’d see it go so far so soon making me need to reevaluate my views. I’ve had to redraw the “line in the sand” and to move it lower as the next and final support level:

If the market doesn’t hold over the next day or so then we’re looking at 750, or down another 18% from today’s close.

Conventional explanation for moves over the past 3-4 trading days is that both hedge funds and mutual funds are liquidating in order to fund redemptions and withdrawals (investors are about to see their October financial statements). The second explanation is that the impact of the credit crises is beginning to be felt in the real economy as evidenced by the slower retail sales reports.

Having said that, take a look at what’s happening to the some of the largest cash machines, the major integrated oil firms. Are they confirming having reached the bottom or the lower boundary of their channels also going to be busted (not these charts cover 23 years!):

  • XOM (Exxon Mobil)
  • COP (ConocoPhillips)
  • CVX (Chevron)

All three of these stocks have grown at the average rate of 10-11% per year.

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