Can someone tell me how this freefall is going to stop?

[Joe Fields]

I'm smart enough to realize that, at some point in the future, the markets will stabilize. The world can't allow them to fail. Hard times for a long time for most of us, though, I'm afraid. But back to the original question. Many analysts have said that what we are seeing in the markets is a result of redemptions and margin calls. This seems to be nothing less than a downward spiral, with no way to stop it, or as one analyst put it today, the market is like a car going down a mountain with no brakes.

Shit really does roll downhill. Why all of these redemptions and margin calls? Mortgage defaults, derivatives. Those huge investment houses, mortgage bankers and lending institutions like Goldman Sachs, Lehman Brothers, Citicorp, Merrill Lynch all ended up owing those lenders that they borrowed from or bought on margin that those same institutions, and many others like them had to come up with money any way they could. So they had to lean on those people that owed them money. This procedure went on down the line. Millions of investors being forced to liquidate their holdings to come up with margin calls. All the way down to the little investor. Credit was all so easy.

So where does it stop? Suppose the DOW blows past the 7500 mark by next week?

Any insight?

[David Dunham]

1. It could end around DOW at 6500 or 6000

[LeftyFingerPop]

2. Capitulation on high volume.

It is when everyone just gives up. It is when the pain of holding a stock becomes so onerous that you are forced to sell. Once we see true capitulation, the market will probably rally sharply, then back down again to re-test the lows.

THEN...it will rise generally, but slowly.

[DJ13]

4. Agreed, but the governments actions to prevent capitulation isnt helping

If the government hadnt interfered the markets probably would have crashed from 13,000 down to around 10,000 and it would have been mostly over with by now.

[Floyd B Olson]

27. Capitulation in slow motion

You may be right, that is the traditional view; BUT we have never seen anything like this! Take any favorite technical indicator for any market index: Bollinger Bands, crashing like never before. MACD, oversold and stubbornly staying that way. VIX making daily all time highs. Everything is far under 50 and 200 day MA.
There will be resistance at the trend lines, followed by new lows. This has a while to play out.

[rpannier]

3. We're certainly better cushioned for this then they were in the twenties

That said...
The telling times of a true disaster are:

1. If they announce one or more 'Bank Holidays.' Days in which the banks are closed to prevent a run on cash.
2. The US Stock Market closes down early (like in Russia) to stop the bleeding.

Those are the signs that we are in serious trouble.

As to what the end brings...I don't think anyone knows.

The 'know-it-alls' they drag on televsion to tell us what is going on are the same people who kept telling us that this wasn't going to happen.

[Joe Fields]

6. Good info. I agree with you regarding the "know it all's"

[Art_from_Ark]

20. As long as they're interviewing "know-it-alls" on TV,

they may as well invite this guy, too, since his advice would be just as useful. Just don't let Caribou Barbie anywhere near him.

[rpannier]

28. Maybe Mr. Whoopee from Tennessee Tuxedo

He could break out "The 3-D BB" and help explain and solve the problem.

[Art_from_Ark]

29. That's the ticket

The 3-D BB knows all!

[Joe Fields]

35. right now Mr. Whoopee is the only one I would trust.

[puerco-bellies]

5. The fever will have to burn it's self out.

No amount of intervention will help to stop this collapse. The only good news is that it usually take a year or two for the effects of a market melt down to filter down to the general population. The bad news is that the middle class is already under duress. We all have about a year to prepare for some really tough times. My grandparents survived the great depression. They all watched every penny.
I used to marvel at their ingrained frugality, and now I will learn their lesson first hand. Good luck to us all.
p-b

[Joe Fields]

8. Yes, my parents and their parents steeled themselves through the depression.

I do happen to think that their generations were better suited for the hardships they eventually had to endure. I think our society is too soft, as a whole. I would like to think, though, that charity will abound. We all will need a little of it, in one form or another in the coming times.

[YvonneCa]

7. Bush resigns...

...early and LEAVES. Period. JMHO.

[spag68]

11. Bush resigns

Living on beans and stale bread would be worth it to see that.

[YvonneCa]

16. Almost anything woud be worth THAT. n/t

[Irish Girl]

18. LOL thanks for the smile

:toast:

[Mind_your_head]

9. Do you have an apple tree on your property?

5 cents/apple. Will 'work' for food ~ barter, ya know....you "got" what I want;-) *lick* :sarcasm:

Be afraid :scared: - or JUST SAY NO! to these evil creeps! (Hint: Say, in no uncertain terms, "NO")

[LeftyFingerPop]

10. Hey Joe...didn't see your name on the OP....

Good to "see" you. :hi:

[Joe Fields]

12. Hi, philboy. Today was the first day I had heard the term 'capitulation.'

If that's true, it may happen sooner, than later. I imagine a lot of people with a lot of money are licking their chops at the deals that this last week created for them. Analysts call this 'building a new foundation.' But us plain folk see it as billionaires going garage saling. Sorry to hear about your losses in the market. I Saw that GM was down by 60% today. Hope you don't own any. But if your money is in a Fidelity Fund, I'm sure everyone in it has a small piece of GM stock.

Good to see you as well. One way or another, we will survive. This I know.

[LeftyFingerPop]

14. Yes, we will survive...

And I'm trying to put this all into perspective...

A friend of mine used to say..."As long as it does not kill me or put me in jail for too long, it is ok".

[meatloaf]

13. Suze Orman seems to think 8200 is where it will bottom out. Personally, I have no idea.

[gopbuster]

15. When Jim Cramer starts squealing BUY! nt

[slipslidingaway]

17. FWIW - Bear Market Until 2011: Analyst - video

http://www.democraticunderground.com/discuss/duboard.php?az=show_mesg&forum=327&topic_id=765&mesg_id=765

We blew through the support level mentioned, but the time, dates and rally before another leg down are interesting.


Also CNBC just had an analyst on from Australia pointing to the 1969 and 1974 vertical drops, his site with charts is below.

http://www.mclarenreport.net.au/articles/articles/194/1/October-10-2008-CNBC-SquawkBox-Europe/Page1.html


Correlation with 1974 market shown here as well.

http://www.mrci.com/special/dspi74.php


See also

1966-1982 Trading Range

http://bigpicture.typepad.com/comments/2005/12/19661982_tradin.html

[gopbuster]

21. Thanks slip.....once it comes down it's a lot harder to get it back up

good reading for later

[slipslidingaway]

22. Very true.. "it is a lot harder to get back up" n/t

[Joe Fields]

23. I can see the correlation, but I have one question:

Were investment banks and lending institutions back during those time dealing with derivatives? I have heard that the government is holding potentially five trillion dollars of toxic debt from AIG. I know that a real value hasn't been formally placed on it yet, but that is the number I've heard. That figure is most likely inaccurate. Whether it is true or not, the amount of toxic debt, and the shockwaves it sends through our economy could sweep over us like a tsunami, could it not, unlike those past years that you have compared to this year?

[slipslidingaway]

24. No the banks were not dealing in derivatives as they are now...

and we are living through historic times. So yes it could get worse, technical ananlysis is not perfect, but I would rather live with it then without it.

:shrug:

:)

[Incitatus]

19. When enough people get scared and sell all their stocks, then a few wealthy

will step in and buy very large amounts of undervalued stocks, making themselves billions more.

[lligrd]

25. "The world can't allow them to fail"? Only If Someone Is Actually

in control? I realize those that thought they were in control wanted to decimate the government's ability to provide social programs but I think they didn't think the consequences of their actions out (what a surprise) and are caught up in it themselves. Nobody is in control right now which is why they all look scared to death.

[Birthmark]

26. What you are asking in essence is...

...what is the numerical value of two decades of unreality, outrageous credit, and profligate spending and speculation. The answer is I don't know. To some extent, I don't really give a rip about Wall Street.

What I *do* care about is making sure that we little people have some money. The government has handed out enough cash to the fat cats. Either it works or it doesn't.

If it doesn't work, the government damned well better have a plan to make sure that there isn't starvation in the streets. After all, there's something like 300,000,000 privately owned firearms in the US. And hungry people might not be too squeamish about using them, especially after all that they have worked for has been flushed. I'm not too anxious to see that.

[leftofthedial]

30. when all the air leaks out of the bubble

the economy has been artificially pumped up--like Bonds or Clemens on steroids--for decades.

there is a huge amount of phony "value" that has to be bled off.

[JCMach1]

31. At this point it is psychology (i.e. panic) driving the markets

It will take something to radically change ...

I see falling/stagnant markets until the first week in November.

[radfringe]

32. the free fall is aggravated by a lack of trust and confidence in our "leaders"

it's been often noted that over the past 8 years, when bush opens his piehole the markets drop noticiably.

However, in the past few months, the piehole effect had worn off, there may have been a dip, but they usually recovered by the end of the day. More recently, when the piehole opens - the markets ignore it and continue their plunge.

the plunge doesn't speed up, it doesn't slow down. the piehole effect has been nullified. When there is NO trust or confidence - it becomes "everyone for themselves" and chaos reigns.

There is ZERO confidence and trust in bush-cheney misadministration to handle this crisis, and that extends to their cronies and buddies. This is not a problem that can be handled with bush's only answer to anything - "cowboy shoot-first"

[JCMach1]

33. Exactly, recovery and eventual rally starts the first week in Nov.

[YvonneCa]

37. Exactly...as long as it's...

...President-Elect Obama. :patriot:

[TexasObserver]

34. Don't start hoarding supplies until it drops below 7500.

I do expect this slide to stop before it goes below 7500. If it goes below 7500, we are in for some serious unemployment and further problems.

Take heart. The 1987 collapse was horrific, and the markets recovered in three years, but the general economy was not really good again until 1993.

I think we're in for a long recovery, which I hope takes hold strongly in 2010. The next 12 months are going to be rough.

[Geek_Girl]

36. When global financial institution stop hoarding cash

and the credit crunch eases up I predict The market will sky rocket.

[seemslikeadream]

38. When it hits 7,400 maybe?