Late Monday Rally Mean Anything? - 9/13/11

oldpigwang

"Zacks.com Profit from the Pros"
It is only fitting that the #1 movie at the box office this weekend was "Contagion" and that is exactly what investors fear will happen in Europe. In fact, Greek bonds are now being priced assuming a 98% likelihood of default. But Greece is not the real problem. It is the concern that their troubles may spread to more and larger European nations creating a "Lehman" type event.

With that backdrop, shares plummeted to as low as Dow 10,825 on Monday. This is fairly close to the lows established on August 10th and the 19th that were followed by sizeable relief rallies. The downside of those previous bounces is that they both fizzled and we found ourselves back at the lows again.

Yes, the 3rd time could be the charm and this bottom may hold. However, with European troubles far from resolved, and general concern of a US recession, I would not bet on that happening. Unfortunately the next wave of fear could press us well below those levels with Dow 10,000 as a likely destination. Play your cards accordingly.

WKN