Well, was that the week when reality finally began to hit the streets? Not quite, methinks - "denial mode" is still alive and well and it will be around Christmas, or even into January before the general public finally starts to get the message. Nonetheless, the Broon one at last used the "R" word on Wednesday, just a day before the 21st anniversary of a certain event that occurred in October 1987....

That recession is now "likely" was the grumpy one's claim, so as ever, he has things roughly half right - just as when he was still officially chancellor, he got his entire economic policy half right - the "end of boom" bit at least was bang on the money when you think about it. And if you alter just one wee word in his now historic boast, you get the whole truth - substitute "then" for "and" in the second part of what he claimed.....for his next trick, he plans to "stop house repossessions." Gosh, thanks to Broon, anyone struggling with the mortgage payments can just forget the whole problem now, and have a celebratory long weekend Christmas shopping in Reykjavik - there are seemingly some real bargains to be had there at the moment. Gordon - trying to stop repossessions will be as effective as your idea of stopping bankers getting bonuses. Ask the Lloyds head honcho for his thoughts on that one.....

Anyway, once again this fella needs to make something VERY clear to a few of you, judging by some recent emails - writing all this kind of stuff in WICS these past few weeks does NOT mean I'm a pessimist - indeed nothing could be further from the truth. MY "R word" is "REALITY" and I have no problem at all in coping with being "realistic". Perhaps if the Broon and Greenspan ones and all their cohorts/sycophants had managed to do likewise over the past 12 or so years, current "reality" would have been just a tad less unpleasant for an awful lot of people?

Speaking of Greenspan, he's still managing to be somewhat economical with the truth - grilled by Congress the other day, he claimed to have suffered "shocked disbelief" at the US (and now world) banking crisis. Oh PLEASE, Alan - do us all a favour! You knew all along that interest rates had been way too low to control the inflation of the debt bubble. You left your ethics at home every day you headed for your desk at the Fed.

On mainland Europe, the prize in the category of "words that will come back to haunt you" goes to the Dresdner Bank head economist who claimed there will be "A robust recovery next year in the overall European economy." And the gold medal for "stating the blinkin' obvious" goes to the Bank of England person who said "This is possibly the largest financial crisis of its kind in human history." In fact, he also gets a prize for weasel wording - "possibly" and "of its kind" - he has a glittering political career ahead if he so chooses....what a bunch! Will there be a whole load of interest rate cuts? Of course there will be! Will they work? Ho ho ho. Time to don the white beard and red suit again, and visit my wee elf chums who live under the walnut tree.....

You will know of course about much of the "reality" that is beginning to hit people in their pockets - JCB staff seem to have acted very unselfishly in accepting a pay cut in order to avoid 350 layoffs - well done to them! And well done too, to Swindon council, for having decided to get rid of so called "safety" cameras aka money grabbing machines. It's long past time that people stood up to Big Brother.

And you'll know about all the "bits and pieces" of bad economic news that surfaced during the past week - Air France in deep bother (again!), profits warnings from just about every car maker on the planet (although Aston Martin seems to be doing better than this old cynic expected - it sold a whole 14 cars in August. Gosh, no Christmas party cutbacks for them then!), half of this year's house sales in Detroit are for under $10000 - and you can buy a choice of properties there for under $1000. "Choice OF properties" mind - not necessarily "choice properties"..... And it seems over 3500 French cafés, bars, and restaurants folded during the first six months of this year. Not good. British pubs seem to be going bust at the rate of 36 per week - also not good. Borrowings by UK citizens are the highest in 60 years (adjusted for inflation of course.) Argos in a mess, Yahoo shedding 1500 jobs - is there NO good news? Of course there is! The English "Ecotown project" seems to be dead in the water. (WICS of 10th February this year refers to that particular scam if you can be bothered looking.)

Speaking of scams, how about this "biofuel" thing being proposed by Drax? Seemingly it could provide 3% of the UK's electricity needs. Sounds good eh? - and SO "ecological"! Big Bizness being ecological? Gosh. Ah, but whence will all the "fuel" be sourced? If it has to be transported more than about 30 miles, then the figures don't stack up environmentally - ie production of the diesel needed to bring the stuff to burn in the power station, outweighs any possible benefit from the electricity generated. How many zillion hectares of willow trees would be needed locally, to generate so much elecctricity? Far more than there are within 300 miles, never mind 30 miles, that is certain. No, the proponents of the scheme are planning to bring the fuel in by ship from what they call "overseas." What a total con. Wave power, guys - that's the ONLY properly "environmentally friendly" way to generate power. Well done in fact to the Edinburgh company that has a full - sized trial thereof up and running, and to the government of Portugal for being farsighted enough to have backed it. Not all "officials/politicos" are total numpties in the pockets of Big Bizness then. (Even though most of them seem to be, sadly - even the next UK chancellor, Mr Osborne - although maybe he has blown his chances for the moment.....)

Anyway, some snippets - and (as suggested a week or two ago in these ramblings, albeit quoting an incorrect figure for the potential cost per citizen) the "100% of deposits" guarantee provided by Irish banks may well prove somewhat optimistic. The Irish economy continues to tank, and its government's revenues cannot hope to cover the full commitment made on behalf of its taxpayers. My Really Scary Granny's crystal ball is a wee bit cloudy right now as to the timing, but you can expect an IMF bailout to be necessary for the Emerald Isle any time soonish. Irish banks are so massively overcommitted to property lending that any honest valuation (ho ho!) would have them shut up shop right now. What is really interesting (terrifying?) is what happens to the last countries in the queue when the IMF itself finally runs out of dosh to distribute?

Speaking of emeralds - it seems De Beers is cutting back on diamond production after a "significant drop in demand". I guess superyachts and private jets too will be getting harder to sell. You have to feel sorry for all these rich folk - soon they'll have to travel First Class like the rest of us.

Talking of "feeling sorry" - what about the poor guy who had to be rescued from a bricked - off chimney in a UK supermarket? Seemingly the poor fellow is being accused of attempting to break in - and all he was doing (according to him) was taking a walk. On a supermarket roof. In the dark. Yeah, right.

But you have to award the "sheer brass neck" prize to the people who stole the Jamaican beach - although allegedly there "must have been police collusion" to have permitted about 500 lorry loads of sand simply to disappear. I expect so, yes.

And the "sort of law abiding but unbelievably dumb" prize has to go to the three hoodlums who took a sledgehammer to a Maidstone jeweller's window, loaded up with Rolexes, and scarpered in a getaway car. Police caught up with them when they stopped at a red light......Anyway, enough frivolity! Bad financial news still to surface - many more hedge funds will go bust. Only about 100 have already done so, but as the toxic waste mess continues to bubble up, an awful lot more will go to the wall. Plenty more banks will fail throughout the world - and as suggested earlier, the IMF will have to dip its toes into water deeper than it will be able to cope with methinks. So "buy shares now - they will never be cheaper" is perhaps a financial adviser's current mantra - but the riposte is easy enough - "So tell me, Mr/Ms Adviser, what are YOU actually buying at the moment?" And if indeed they ARE buying, then frankly they don't understand anything about what is meantime going on. Obviously there will be a (possibly quite substantial) bear market rally any time now - but it won't mean the bottom has been reached. Of that fact, my Really Scary Granny's crystal ball is quite certain! Anyway, the great thing for TRADERS as opposed to INVESTORS is that there are ALWAYS going to be great profit opportunities, whatever market you might trade - which is why (as mentioned above) IW is most definitely NOT a pessimist - and neither should YOU be.

On that note, let's move on to today's charts, and first we'll look at some nice support on that of Babcock, with a gap underneath it. Then we'll see why AXON is a "no - no" and finally we'll look at a potential "falling wedge" on the Nasdaq100 chart, and what that might imply.

Finally for tonight, here's an email from one of you - thanks "MW" and my reply thereto:

"Hi Ian,
Just looking through the charts I can see that prices are going down and down. Many of the better value trades would now need to be sold at under 200. So far I've used 200 as the cut off point, but given there are more pips per point to be had and it looks like the market is still going down, I'm wondering whether it makes sense to lower this target to around 150 or so. Do you have a minimum price that you will take a sell trade?
Thanks
MW"

"M - there are so many decent sells that I would see no point in bothering to open a trade below 150. At 150 (ie 149 cash) & with spread costs to cater for, & then a high probability of a bounce off 100, there's just not enough profit potential in my view - a different matter of course if something screams "sell!" via very strong prior support & if spreads are low enough. But for now, it's 'buys' that are hard to find & 'sells' are everywhere".

I get quite a few emails like that - it's a perfectly valid question of course - and hopefully my reply as above, will help a few of you. When we're "spoiled for choice" there is no need to be less than very selective!

Anyway, that's all for today, so happy trading until next weekend.

Ian.

'IMPORTANT NOTICE: These WICS charts are for EDUCATIONAL PURPOSES ONLY. They represent only MY understanding of what is happening in the market for any particular share, stock, commodity or index. In NO circumstances should they be construed as recommendations to trade. If I choose to trade what I see, that is MY decision. YOU must, in turn, come to YOUR OWN conclusions about what action, if any, YOU might choose to take'.