Critical Week for Global Stock Markets and Economic Recovery

According to recent research from JP Morgan, the next week or so could be an important period of time for the stock market.

This research is based on the S&P 500's intraday low of 838 on October 10, which had been the index's lowest point prior to Thursday's intraday low of 818.

JP Morgan examined more than a century of bear markets to look for recovery patterns and came up with a few interesting observations. It found that market bottoms are almost always retested, and that such retests result in a new low about 40 percent of the time.

History shows that three-quarters of the retesting events occurred within 44 days of a bottom, so if the October 10 low in fact marked a bottom, a retest (which could create a new low) should be expected prior to November 23.

The longest span for retesting a low was 104 days in 2002. A repeat of that extreme case would schedule the retest for January 22, 2009.

Of course, JP Morgan makes no promises that October 10 is the pivotal date. One of its causes for concern is market volatility, as measured by S&P's intraday swings. As an example, Thursday's swing – a high of 913 and the 818 low – was more than 10 percent of the index's value.

G20 Economic Summit Changes Nothing

The conference did not address the real causes of why the world is heading into a global recession or why the U.S. economy in particular is in such dire straits. Nor will the meeting result in redress of the staggering level of bankers' criminality abetted by the U.S. government in the creation of the financial bubbles whose collapse is underway.

The real problem is that the world is locked into a debt-based financial system run by the world's banks, where the only way currency can be entered into circulation is through lending. It's been massive amounts of completely irresponsible lending which have leveraged the bubbles against much smaller amounts of tangible value.

World With No Engines Of Growth

Nouriel Roubini is writing about the Rising Risk of a Hard Landing in China .

For the last few years the global economy has been running on two engines, the U.S. on the consumption side and China on the production side, both lifting the entire global economy. For the last few months the first engine of global growth has effectively shut down as the latest batch of macro news from the U.S. are worse than awful: collapsing consumption and consumer confidence, plunging housing, collapsing auto sales, plunging durable goods spending (while supply side indicators such as production, ISM and employment are also free falling).

There are now increasing signs that the other main engine of the global economy – China - is also stalling. Let us consider now in detail the evidence that China may be on its way to a hard landing…

As always, Roubini writes an excellent column that is well worth a look.