Market Technicals
Where is the market headed? 2010 is going to be a volatile year for investors. The federal government is running trillion dollar deficits and issuing massive amounts of debt. With interest rates near zero in the short end of the market, it would appear that they have nowhere to go except up. The only economic strength that was seen in the fourth quarter was a result of inventory rebuilding, as real final demand remains anemic. The prospect of sovereign debt defaults is real. The countries of Greece, Spain and Portugal are in financial distress. As the dominoes start to fall, things will get ugly. There will be an initial flight to safety in the U.S. dollar, but the stock market will begin an ugly correction. A close below 10,000 in the DOW will lead to a test of 9500, but it won’t provide much support. Look for an eventual retest of last March’s lows.