I’m not sure what to make of the market today. On the one hand, the S&P dropped 2.36% to set a new cycle low, closing at 735.09, with an intraday low of 734.52. Clearly, closing at the lowest level in 12 years is not good news.
But, the economic news today was horrible. Q4 GDP numbers were massively revised down, GE slashed its dividend by 68%, Citi had another massive infusion of taxpayer dollars, GM is truly on the precipice of bankruptcy, etc. The S&P could easily have dropped more. And 735 is just 2% below my approximate “fair value” number of 750. Signs of resilience?
On the other hand I’m reminded of this quote that I posted earlier:
The singular feature of the great crash of 1929 was that the worst continued to worsen. What looked one day like the end proved on the next day to have been only the beginning. Nothing could have been more ingeniously designed to maximize the suffering, and also to ensure that as few as possible escaped the common misfortune.
– John Kenneth Galbraith, “The Great Crash”
And, it’s time to look at the Four Bad Bears chart again. It looks a lot like 1929.