How Low Can It Go? Watch This Big Trendline

October 25, 5:00 pm EST

Yesterday we looked at this big trendline support in stocks (the yellow line).


We had a good bounce today, but experience tells me that we will make a run at that trendline, and things will look a little messy before we bottom.

We still have seven trading days before the mid-term elections.  A stock market in correction is not as easy to promote as one at record highs (as we had just earlier this month).  With that, I suspect there are plenty of interests (China among them) to keep the pressure on stocks in hopes of dividing U.S. Congress come November 6th.

When the dust clears from the elections, market folks will realize that stocks are incredibly cheap at 15 times next year’s earnings estimates, in an economy growing better than 3%.

On that note, we have our first look at third quarter GDP tomorrow.  The market is looking for 3.6% growth, which would give us 3.22% annualized growth averaged over the past four quarters. That would be the best growth since 2006.

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