Technicals for major stock indexes are very bearish, but a bailout could turn them around

We’re all speculators, and we’re all very discouraged with the way the global bailout talks are going in Washington.

And that’s why the major indexes such as the Dow Jones, Standard & Poor’s 500 and Nasdaq 100 are looking so weak.

Take the exchange traded fund (ETF) for the Dow Jones, for example. It’s called the Diamonds and its symbol is DIA. On a point and figure chart, its price objective is some 20% below Tuesday’s close.

The ETF for the S&P 500 is SPY. It’s bearish price objective also is some 19% below Tuesday’s close.

And the ETF for the Nasdaq 100 is QQQQ. Its bearish price objective is 23.6% below Tuesday’s close.

But there are a couple of bullish looking charts. The S&P Midcap, MDY, still is sporting a bullish price objective 36.7% above Tuesday’s close. And the Russell 2000 (IWM) has a bullish price objective 43.7% above Tuesday’s close.

Daily charts are here. Click on a chart to see a gallery of charts.

For the moment, these technical indicators are barely interesting because so much hangs on what the Bush Administration and Congress decide to do about a bailout for the financial markets and the economy.

It appears that they’re at each other’s throats, but a lot of the bluster we’ve heard today may be just for show while the real negotiations are going on.

I’m betting the markets will open lower Wednesday regardless of the Berkshire Hathaway investment in Goldman Sachs, unless some compromise on the bailout is announced before the markets open. People are scared and mad, and they are in little mood to buy. As long as there is a buyers’ strike, prices aren’t likely to rise and probably will fall.

It’s all very unpredictable and the safest place to be is on the sidelines.

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