Dow Hits 6-Year Low

It is true that the Dow (30) Industrials have closed below the March 2003 closing low of 7,524.06 by closing today at 7,465.95. If you started buying near the top in the 14,000 range this is bordering on real torture, the kind that should be outlawed by the same international conventions mentioned when talk of Gitmo and terrorists are brought up. This breaking of the support of the March 2003 was even done on higher volume than yesterday, but it's not all bad.

For those investors familiar with Dow Theory which compares the Dow (30) Industrials to the Dow (20) Transports there may be signs for hope. The Dow Transports, though breaking through support, are still nearly a full 30% ABOVE their 2003 lows. This is non-confirmation of the Industrials nreakdown. The Dow Transports would have to fall nearly 30% more just to get to its 2003 lows.

With fuel prices falling and the Baltic Dry Index picking up, meaning shipping is picking up I find it difficult to believe this fall in the Dow Industrials will be confirmed in the near term by the Transports, so the decline may not continue for much longer.

Both the Transports and the Industrials are also oversold, extremely so. I don't think we will rally tomorrow, maybe not even on Monday, but on Tuesday or Wednesday we could see the beginning of a rally of 30 to 35%. This, however, is not THE bottom but possibly the beginning of a major bottom.

Of course the worst case scenario is that the Transport fall that 30% and the Industrials follow and that becomes the real capitulation bottom. That would put the Industrials at the support plateau of 1995. That would wipe out nearly 14 years of investment gains in the Dow Industrials, and that is nearly how many years of gains were wiped out by the final bottom following the 1929 Crash.

But I don't believe we will fall that far. One reason is that even though throughout the 1920's the Republicants controlled ALL THREE BRANCHES of the federal government, just like this decade. Back then the American people could only throw the Republicants out of the House and the Senate, which they did. The Nation had to suffer through two more years of Hoover because there wasn't a presidential election until 1932. This time the Democrats have ALL THREE BRANCHES of the federal government and, they have turned on the money spigot and have done so shortly after the Republicant delivered disaster struck, not two or three years later.

Now, I'll admit I have problems with some of the Stimulus Bill, and parts of the Housing Bill but maybe, just maybe, if small compromises can be made in the Housing Bill we can avert another Great Depression and start to see the beginning of the end of this economic crisis.

Even though there are many similarities between the 1920's and this decade, Republicants controlling the government, Florida real estate Boom-Bust (and then some) at least the farmers and their farm land are in better shape than back in the Twenties. Back then the plight of the farmers and their fast disappearing farmland (think Dust Bowl)was ignored by Republicant controlled DC for years before The Crash.

Of course, if the stem rust which is destroying 80% of the wheat crop in Africa makes it to other wheat producing countries like ours it will destroy 80% of our wheat crop as well because this particular form of stem rust is destroying crops scientifically designed to resist it. If that happens I take back everything about this possibly being the beginning of a market bottom because history would go from merely rhyming to actually repeating itself.