We all know what it will take to turn the economy and the stock market around:
First and foremost, fix the banking system. Unclog the arteries and get capital flowing again. Send the auditors in, find out where the skeletons of hidden debt lie, get rid of the bad banks and make sure the good ones work.
Once our banking system starts to work again, the entrepreneurial nature of our economy will start to work. The creative destruction described by Economist Joseph Schumpeter will mean that new businesses will replace the industries that were ravaged during the current economic downturn
Second, provide some sort of intelligent responsible fiscal safety net for the economy. The current $860 billion stimulus package about to be passed by the Congress is not the answer. Instead of permitting the Nancy Pelosi Harry Reid pork laden hodgepodge spending spree to occur, President Obama should have taken the bull by the horns and stood up to all members of Congress with his own well thought out plan. He certainly had the mandate to do so.
In our system "the president proposes and the Congress disposes."
Unfortunately that has not happened, so we are months into the economic crises with no realistic plan in sight. As a result, the stock market is drifting down at the bottom of it's trading range.
The stock market turnaround template is still in place but is looking wobbly. .
In order to turn around, the market has to see for real that the banking system is being fixed. Then the market can look above to the various Resistance levels at 9000, 9700, the 200 day moving average and the downtrend lines. Instead, the Dow is on the balls of it's ass in some sort of declining right triangle type pattern. Cleanly break through the October and November bottom and down we go again.
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