Last week, when the Dow Jones index was around 10,800 I said investors should watch out if major support around 10,000 was broken.
A week later and the Dow Jones is over 1400 points lower at below 9400. The markets are hugely oversold so a bounce could happen any time but the big picture suggests that anything could happen now. It seems unthinkable but the next major support level is around 7,000, the low point of the 2000-2003 bear market.
What is going on? First, let’s take the banking crisis. There is no sign that the authorities really know what to do. Yes, they are throwing huge amounts of taxpayers’ money at the problem but the whole exercise is like the boy in the story rushing to plug his fingers in the holes as Holland’s dykes sprang ever more leaks.
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