Feeling Bullish ? Here is a dose of pessimism

If you feel that the bear market has come to an end, here is a point of view that suggests much worse is coming.
http://www.theoildrum.com/node/4303#more
After providng a review of the forecast made in January 2008 ( came true on most counts), the author tells us:
“Looking ahead
As we go forward, I expect that there will be more and more individuals, businesses and governments that will be unable to repay their debt, because of indirect impacts of higher oil prices flowing through the economy. Eventually, the US government will have to make a decision as to what to do about all these defaults. The most obvious options would seem to be:
(1) Prop up as many as possible
(2) Let the chips fall where they may
Either of these would seem to have the potential to lead to serious disruption. If the “prop up as many as possible” approach is used, it theoretically could lead to a high inflation rate, high interest rates, and a severe drop in the dollar. I would expect imports of all kinds to drop, including petroleum imports. This could lead to parts of the country losing liquid fuels because the pipeline structure cannot easily distribute a much smaller fuel supply. The decline in imports other than oil could also be a major problem because we manufacture so little ourselves.
If a “let the chips fall where they may approach” is followed, it is possible that bankruptcies will cascade through the system. If there are inadequate funds in the FDIC, and banks are simply allowed to fail, this would have very negative consequences. One can think of a lot of other organizations that might need propping up–states with a lot of debt, like California; Fannie Mae and Freddie Mac; auto manufacturers; airlines; LNG terminals; independent oil refineries; and pension funds, to name a few. ”
Wisely, the author says he cannot be sure of what will eventually happen:
“How much of this will happen in the next two quarters? I don’t know. It is likely that Ben Bernanke and Henry Paulson have some ideas I haven’t thought of, and there is a way out of this predicament. I don’t have all of the answers. It is likely to be an interesting rest of 2008.”

This is my third post for the weekend, two more are found below this one.

Technical Analysis of the Indian Stock Market

Looking at the markets and trading in them every day, sometimes hides the bigger picture, as day to day fluctuations begin to influence our analysis.
So, today is an attempt to relook the chart for the Nifty which represents the Indian Market , without any preconceived bias.
A four and half year bull market is visible from a low of 920 in April 2003 to a high of 6350 in January 2008. From the January highs, the decline to 3800 in July is a bear market, in terms of points lost (2500 points) and percentage (46% retracement of the entire bull move, and 39% decline from the top – 2500 points of fall is 39% of 6350). The momentum of the decline, the breaking of repeated support levels, makes this decline a bear market.
So far so good. But, all of this is history. While technical analysis does not try to predict the future, it does try to say where the market is now. This is significant information, since if the analysis suggests that the market is in an up trend, then we should buy, and so on….
The last leg of the decline from 5300 to 3800 was marked by lower highs and lower lows, with not even one correction moving above the previous high. This was a strong message that the market is weak.
This pattern has been broken, with a minor high at 4540 made on July 24, which was higher than two earlier minor highs, 4215 (July 11) and 4325 (June 26). We now have a pattern of higher highs. To begin an intermediate up trend, we require a second pattern – higher lows. On July 29, a sharp correction saw the Nifty make a low of 4159, and the index has since moved up to record higher levels. Thus, the 4159 low is now a minor low, higher than the earlier low at 3800. The pattern of higher highs and higher lows is complete.
The current chart pattern tells us that we are in an intermediate up trend. This uptrend stands cancelled if and when the Nifty closes below 4159. The level of 4159 will change over time.
We may well be in a primary bear market. If this is so, then at some point the intermediate uptrend will break down. But, traders should follow the intermediate trend, meaning that most of their trades should be in the direction of the intermediate trend.
It is also possible that the up trend may break down after a false rally, or even quicker, starting from Monday itself. In such cases, traders will face small losses. This is what is called a whipsaw. That’s the way trading works