According to press comments over the last two days there is now a 60% to 80% chance of a double dip recession occuring. That means that it is likely that all that has been suffered by individuals, businesses and the economy as a whole over the last two years is going to be suffered all over again (for another two years??).
The Stock Market took a hammering in 2007 and 2008 so does this mean that it is going to take another hammerin in 2010 and 2011? The picture painted by our analysis suggests that it will. Over the past weeks and months we have been drawing attention to the increasing probability of an eventual break of the FTSE 100 index below the 5000-5100 area of support and to the likely result of that break being an eventual collapse down to the 3500 area.
Yesterday’s fall to the close at 4914 suggests that the collapse has, indeed, started. However, there are trwo important points to consider: Firstly, thsi may be nothing more than an isolated scare and the FTSE may bounce back and leave many ‘bears’ with red faces and nursing some trading losses. In other words, just as one swallow doesn’t make it summer so one day’s nasty move doesn’t make for a general collapse. But secondly, and more likely, if the FTSE closes below 5000 at the end of the week, on Friday, then this is a strong signal of worse to come – but it may not happen quickly and it may be early autumn before the more general and steep collapse occurs.
The dotted red arrows show the potential collapse -
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