President Obama said his economic recovery plan has “three legs.” One is the stimulus package he signed yesterday, as the Dow dropped 298 points. One is treasury secretary Tim Geithner’s plan, announced a week ago, to revive the banking sector. That plan bombed immediately, sending the Dow down 382 points. The final leg Obama announced today. It seeks to help homeowners facing foreclosure to remain in their homes. At least today, the market didn’t plunge. Nevertheless, my FOX INDEX [chart] settled at its lowest point since last November, when Obama’s naming Geithner his treasury chief sharply lifted the market.
The FOX INDEX, which measures the distance to a healthy market (12,000 Dow, 1,300 S&P, 2,500 NASDAQ), hit its bottom of -6,179 (index is 6 months old) last November 20th. It’s now one bad day from a new low, and 89% of the way toward the eleven-year low the market reached in October 2002.
Can we hope for a near-term market turnaround? Richard Dickson, market strategist at Lowry Research in Florida, said unless we have a rebound rally soon, the market should drop below its November lows. "A failure of demand to develop would suggest the market is vulnerable to another leg lower in the still-ongoing bear market," Dickson wrote in a note to clients.
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