Technical analysis points increased Double Dip recession risks

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Technical analysis points increased Double Dip recession risks

Posted On : Oct-10-2010 | seen (384) times | Article Word Count : 595 |

Technical analysis of equity markets worldwide reveal a very serious chance of a double dip recession soon.

One of the most frequently forgotten facts about the Great Depression was the many small stock ”recoveries” that marked the period between 1929 and 1940. In fact, while the general trend was on a decidedly downward shift, there were many instances where the stock market seemed to zoom up only to settle back and continue its long decline. These mini-spikes occurred mostly dramatically in the period between the great Stock Market Crash of 1929 and 1933.

While it is tempting to draw on the eerie similarities between 1929 and the global financial crisis of 2008, recent trends in the recovery of global manufacturing, global equities, and trade volume point to a definite, although uneven, recovery. The question is: Is this sustainable? Considering the massive quantitative easing, rock bottom rates, and various shades of “stimulus” enacted by governments all over the developed world and the debt this process created, the recovery might be built on shaky foundations. As shown by the experience of Greece, deficit spending and high government debt come at a steep political and economic price. Greece's problems after its debt fallout sobered up its neighbors (namely the British, the French and Germans) to realize that while the recovery is real, the bill is coming due—and fast.

“It is sadly ironic that the success of the birth of the recovery in Europe and the US has brought on pressures that would result in its early death,” Marco Hines-Zambrano, Chief Technical Analyst at TechnicalAnalysisTips.Com. “There is an austerity trend that spans from London to Berlin to Paris to Athens. Depending on how well the Republicans do in 2010 and 2012, the austerity train might make a stop in Washington DC soon enough.” The rush to austerity to fend off a fiscal meltdown caused by massive deficits brings with it frozen government spending, pump priming, and stimulus schemes. With less government spending and consumer spending already depressed, there currently seems to be no obvious sustainable basis to for a sustained recovery.

Even China and other emerging markets don't offer much of a lifeline to western economies as these emerging markets continue to “decouple” from the West. They appear to have learned early on that an over dependence on Europe and the US might drag their economies down along with their export markets. Consequently, there is a sustained drive in China, in particular, to boost consumer and domestic spending to further speed up independence from OECD countries.

According to *technical analysis tips* based on a heavy review of US equity market trends, the market appears to be well aware of the fundamental shakiness undergirding the “recovery.” Consequently, trends do reflect a skittish tentative pattern. Greater economic indicators point to larger profit taking sessions in the future which might pave the way for a sustained downward trend as more and more institutional investors focus on emerging markets for better returns. The recent problems with bank foreclosure rules and processes further muddies the water and builds greater uncertainty into the market. Given all the factors above and historical patterns, it is no wonder that the IMF has recentlyadmitted that Western economies are near depression levels. Indeed, the issue of a double dip recession is not a question of IF but of WHEN.

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<h1>Technical analysis points increased Double Dip recession risks</h1> Author: <a href='http://www.articleseen.com/profile_marco101.aspx'>marco101</a> One of the most frequently forgotten facts about the Great Depression was the many small stock ”recoveries” that marked the period between 1929 and 1940. In fact, while the general trend was on a decidedly downward shift, there were many instances where the stock market seemed to zoom up only to settle back and continue its long decline. These mini-spikes occurred mostly dramatically in the period between the great Stock Market Crash of 1929 and 1933.

While it is tempting to draw on the eerie similarities between 1929 and the global financial crisis of 2008, recent trends in the recovery of global manufacturing, global equities, and trade volume point to a definite, although uneven, recovery.  The question is: Is this sustainable?  Considering the massive quantitative easing, rock bottom rates, and various shades of “stimulus” enacted by governments all over the developed world and the debt this process created, the recovery might be built on shaky foundations.  As shown by the experience of Greece, deficit spending and high government debt come at a steep political and economic price.  Greece's problems after its debt fallout sobered up  its neighbors (namely the British, the French and Germans) to realize that while the recovery is real, the bill is coming due—and fast.

“It is sadly ironic that the success of the birth of the recovery in Europe and the US has brought on pressures that would result in its early death,” Marco Hines-Zambrano, Chief Technical Analyst at TechnicalAnalysisTips.Com.  “There is an austerity trend that spans from London to Berlin to Paris to Athens.  Depending on how well the Republicans do in 2010 and 2012, the austerity train might make a stop in Washington DC soon enough.”  The rush to austerity to fend off a fiscal meltdown caused by massive deficits brings with it frozen government spending, pump priming, and stimulus schemes.  With less government spending and consumer spending already depressed, there currently seems to be no obvious sustainable basis to for a sustained recovery.

Even China and other emerging markets don't offer much of a lifeline to western economies as these emerging markets continue to “decouple” from the West.  They appear to have learned early on that an over dependence on Europe and the US might drag their economies down along with their export markets.  Consequently, there is a sustained drive in China, in particular, to boost consumer and domestic spending to further speed up independence from OECD countries.

According to *technical analysis tips* based on a heavy review of US equity market trends, the market appears to be well aware of the fundamental shakiness undergirding the “recovery.”  Consequently, trends do reflect a skittish tentative pattern.  Greater economic indicators point to larger profit taking sessions in the future which might pave the way for a sustained downward trend as more and more institutional investors focus on emerging markets for better returns.  The recent problems with bank foreclosure rules and processes further muddies the water and builds greater uncertainty into the market. Given all the factors above and historical patterns, it is no wonder that the IMF has recentlyadmitted that Western economies are near depression levels.  Indeed, the issue of a double dip recession is not a question of IF but of WHEN.

About TechnicalAnalysisTips.Com

TechnicalAnalysisTips.Com helps investors learn to use technical analysis when making trading decisions. The information offered at TechnicalAnalysisTips.Com is based on several years of proven analysis and trading success.
About the Author: TechnicalAnalysisTips.Com helps investors learn to use technical analysis when making trading decisions. The information offered at TechnicalAnalysisTips.Com is based on several years of proven analysis and trading success. Article Source: <a href='http://www.articleseen.com/Article_Technical-analysis-points-increased-Double-Dip-recession-risks_36977.aspx'> http://www.articleseen.com/Article_Technical analysis points increased Double Dip recession risks_36977.aspx</a>

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TechnicalAnalysisTips.Com helps investors learn to use technical analysis when making trading decisions. The information offered at TechnicalAnalysisTips.Com is based on several years of proven analysis and trading success.

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