SOS DJIA peaks at 2007

Here is what was reported in the media before it peak at DJIA 14,000 points.

1. Think back to 2007. "Goldilocks economy," strong corporate earnings,
2. U.S. unemployment at 4.4%; nothing but blue skies ahead.
3. The Dow rallies to an all-time high above 14,000 in October 2007... and
4. over the next 18 months, loses 54%, ushering in "the Great Recession" that continues to this day.
5. Now fast forward to March 2009. The Dow has crashed below 6,500;
6. U.S. unemployment has more than doubled;
7. desperate Fed has dropped interest rates to 0%; foreclosures; bailouts; consumer confidence at an all-time low; general state of near-panic.
8. The Dow bottoms out on March 6, 2009 and stages a powerful multi-month rally above 11,000.
9. By conventional logic, you'd have to agree that, paradoxically, "good economy" prompted the 2007 crash while "bad economy" produced the 2009 rally.
10. But here's a better explanation: Broad market trends are not created by the news or economic conditions -- social mood is what creates them.
11. Social mood doesn't depend on what Ben Bernanke had for breakfast -- it changes for endogenous reasons, and those changes follow the Elliott wave model.
12. 'Lehman Brothers-2': Don't we need another similar catastrophe for stocks to crash?"

MyView

1. Most investors chasing over stocks based on earnings, historical earnings. Look at 2007, earnings was fantastic, strong corporate earnings. But it still crashes.
2. Look at March 2009, corporate earnings dropped drastically, unemployment doubled, corporate earnings is bleak, but it rebounded from 6500 to about 11,000.
3. Now, August 2010, strong corporate earnings for last 2 quarters, unemployment remains double of 2007, what NEXT.
4. So, what is your call, next 18 months, UP or DOWN? Or will it depends of Fed again? Why not? Until one is clear what Fed can or cannot do, one better stays out of the market.
5. Well, not necessarily, the probability of down is higher due to:

• Unemployment is high
• Credit is shrinking
• Bad loan are swept under the carpet
• Derivatives remains very high
• Americans are savings more now

In short the problems were not solved, merely postpone via the reflation of USD12.5 trillion. Chances for round two bailouts?