Why This Will be a Ghoulish Week on Wall Street

by ETFguide | November 1, 2010 1:11 pm

As everyone knows, Sunday evening was Halloween and your neighborhood, like mine, was probably filled with ghosts, goblins and ghouls as we celebrated this timeless holiday.  Halloween is thought to have originated from the ancient Celtic festival of Samhain, or summer’s end, and marks the end of the lighter half of the year and entry into the darker half.  It’s a holiday to honor family ancestors and don costumes and masks to ward off evil spirits and avoid harm.
But beyond Halloween, All Saints Day is Monday, November 1st, a largely Catholic holiday celebrating those who have been beatified, and Tuesday, November 2nd is the Day of the Dead, a Latin American holiday celebrating the departed. Tuesday is also All Souls Day, a Western Christian celebration of the faithful departed.

There is some delicious irony in the timing of these holidays celebrating the dead and the warding off of evil spirits with this week’s upcoming action on the economic and political fronts.

For Tuesday, the Day of the Dead, is the day of the mid-term elections when the Democrats try to resurrect themselves from the dead and the Republicans attempt to permanently stick a political stake in the hearts of the President and his allies.

Also on the Day of the Dead, Dr. Bernanke and his colleagues begin their two day meeting which is a desperate attempt to save an economy that’s clearly near death and to ward off the evil spirits of recession and deflation that stubbornly refuse to stop haunting Wall Street and the Federal Reserve.

This week is clearly the most important week of the year on the economic and political fronts with a blizzard of important reports, the election and the Federal Reserve’s widely watched announcement regarding “QE2”.

Very likely by Friday we will be living in a vastly altered political and economic landscape shaped by the outcome of this potentially ghoulish week.

Looking At My Screens
On a technical basis, the equity markets are set for a serious decline.  As in the three previous market tops this year that were followed by significant declines, we currently have high, overbought RSI readings and Stochastic readings that are overbought and on “sell signals.

Furthermore, bullish sentiment is at extreme levels of optimism, insider selling remains high and volume, breadth and momentum are all in declines and generating bearish indications.

It will be a significant week for U.S. equity markets and by Friday we will know if the week has brought “trick” or “treat.”

This article was written by John Nyaradi of ETFguide.com. ETFguide is the information leader on exchange-traded funds because of its vendor-neutral approach and its progressive reporting style. Unique features include an ETF bookstore, a monthly e-mail newsletter and subscription-based ETF portfolios.

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