With the 800 support level broken last Friday, the stock market deteriorated further this week as what I have indicated in the previous blog. The S&P 500 index closed this week at 735, down 4.5% for the week, the Dow Jones Industrial Average fell 4.1% and the NASDAQ composite index went down 4.4%.
The long term stock chart provides a very pessimistic view of the stock market going forward. As seen in the monthly chart of S&P 500 index for the past 20 years, the price has broken the 800 support level and is heading down to a level I do not even dare to say. The momentum (the STO) is extremely low (the lowest for the last 20 years) and indicates that the downward movement will last for sometime (maybe for another year?). Of course, the future is not that predictable. We can only hope that the stimulus measures taken by the government can work their magic to at least stabilize the market.
Preserving cash is still the best strategy in this vicious bear market. Whoever has the buying power when the market turns around will come out as the winner at that time.
