Shares look set for a mighty fall [View All]

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The Dow Jones and Nasdaq went below their 200-day moving averages last week, a bad sign for chartists. The US consumer is beginning to stop spending and staggering under a weight of debt. Unfortunately consumer spending makes up two-thirds of the US economy. It does not look good!
After the worst week for shares this year, with Friday the worst day on record so far too, this is not a bad point to reflect on the market outlook for shares in the US markets.

This is also highly relevant to other capital markets around the world. For if Wall Street sneezes everyone else will get a cold, and even the sky-high, oil-fuelled Middle East bourses will not be immune; this could be just the thing to bring them crashing to earth.

Now US share valuations have actually been remarkably resilient in 2005. Ignoring warnings on consumer demand, plunging car sales, the phenomenal trade deficit despite a very weak dollar, and rising interest rates, stocks have held their ground. Investors have been convinced by the rhetoric of Wall Street and kept their nerve.

However, as somebody once noted market forces are like pulling a brick at the end of a piece of elastic; you pull and pull, and nothing happens; then the brick flies forward and hits you in the face.

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