February 20, 2009: As the financial markets near their lowest closing prices in years, Pimm Fox interviews Louise on Bloomberg Radio's Taking Stock. Fox notes a sense of relief among investors that the markets are not closing even lower. Where, he asks, do Louise’s charts and analytical techniques indicate we are headed from here. Rather than make long-range predictions, she replies, it is better to take developments step by step. The technical evidence over the past six to twelve months points to the downside. We have continued to lose sectors and individual stocks and now the indexes have breached below the November lows. Every rally has failed below its prior rally level -- indicating investors selling into strength – as corroborated by the up/down volume statistics. The evidence shows that the S&P 500 has fallen below the November lows, and even the 2002 lows, and the index looks like it will close today below 776. Both the DJIA and the S&P 500 have formed what could be defined as 10-year double tops -- if the 2002 lows are now definitively breached there is a good chance of further attrition and deterioration. The Great Crash of 1929 wasn't the decline that wiped out the wealth. The 1929 crash was a 48% to 49% decline (parallel to 2007-2008). Then, following a rally in 1930, the Dow declined and penetrated the 1929 low, which was a critical support, and thereafter the market continued downward to achieve a total 89% decline. The markets are already down 49%-55% from peak to trough, 2007 to today, as the 30- to 40-times leverage has been unwinding, perhaps leaving the 2003-2007 ascent as a "leveraging mirage". Breaking below the 2002 lows now could parallel the downward breach of the 1929 lows, and could trigger the possibility of another serious decline. Bear markets have an average length of 13 to 16 years so this bear has several years yet to run. There can always be strong interim bear market rallies, of course, but the repair process needed today could

Let's hope the trend lines will hold the market up in the months to come!