There is a good reason for calling it Red October as historically it is a month when the markets go down, sometimes by large amounts.  In my last post I was saying the the rally had got to a ridiculous stage, now I believe we are seeing the start of the long awaited correction.  I have two charts for you this week.  The first is a daily chart which shows the market has reached a support level of 4925

The next support level is 4500, then the July lows of 4075. If the market breaks through these levels then we are looking at retesting the March lows of around 3500.  But lets look at the longer period. Here is a Monthly chart.

In this chart the market has broken the support level of 5000.  The next week will tell if the market bounces again above 5000, or heads lower. My pick is lower, but I’m sure you guessed that. Why am I so bearish? One reason is that John Mauldin is bearish, I have been reading his weekly eletter for nearly 8 years and over that time he has been the most accurate in his outlook.  This week is a “must read” I have a link under “Recommended” for you to subscribe to his letter.

Another 3 banks in the US failed on Friday, bringing the total to 98 for the year. Next weekend will see triple figures.  The FDIC is running out of money and bringing forward fees the banks have to pay.  The next problem for banks is that commercial loans are failing at an alarming rate.  Home foreclosures are still at or near record levels.  There is fear about what will happen to home sales when the first homeowners grant of $8,000 ends in November.

On Thursday the initial unemployed number came in higher than expected at 551,000. Over half a million people have lost their jobs in only one week.  On Friday the non-farm payrolls also came in higher than expected with 263,000 jobs disappearing, and the “official” unemployment rate climbing to 9.8%  Everybody might be saying the recession is over but in reality it will not be over until jobs are created, not lost, and unemployment starts falling.