Reacting to news of yet another rate cut by the Federal Reserve, Wall Street soared high on Tuesday, sending the Dow Jones Industrial average up by more 400 points today. Helping the surge were better than expected numbers from big banks Lehman Brothers and Goldman Sachs, which momentarily eased the concerns after the collapse of Bear Stearns and it’s $2 per share buyout by JPMorgan.

Can also be good news for the housing market? Possibly, if it helps to push mortgage rates lower and opens the credit funnel a little wider. We’d love to think of having gotten through the worst of the housing crisis - even have signs of hope but the truth is that situation is dismal not only in the US but worldwide.

Despite today being Martin Luther King day in the United States and the US markets being closed to mark the holiday, that didn’t stop the world markets from suffering some of the biggest single day losses in recent years. Investors around the world are beginning a panic sell-off, weary of news that the US economy is headed for recession or a major economic slowdown.

Brokers and dealers on the world markets claimed the spark for the global meltdown was an overall disappointment at US President George W. Bush’s tax plan to revive the world’s largest economy. Following heavy losses in Asian trade, the European markets opened lower and then went lower again in the course of the afternoon as investors opted for safety and took their money out. In London, the FTSE 100 index plunged a whalloping 5.48 percent to 5,578.20 points. In Paris, the CAC 40 index lost 6.83 percent to 4,744,45 points and in Frankfurt the DAX shed 7.16 percent to 6,790.19 points, with both the French and German markets seeing the biggest single day losses since the 9/11 terror attacks on the United States.

The Toronto stock market took a massive hit of more than 600 points Monday before recovering slightly in the afternoon, as analysts showed concern about economic troubles south of the border. The S&P/TSX composite index fell 617 points, before climbing slightly back by 3:30 p.m. to a deficit of 562.12 points at 12,175. Last week’s losses of 6.6 per cent wiped out the TSX’s entire gains for 2007.

Blue chip stocks lead the declines in most markets, dragging major indexes in Hong Kong, Shanghai and India down by more than 5 percent during the day, while those in South Korea and Australia fell by nearly 3 percent. In Japan, which itself may be facing a new recession, the majority of indexes were off by more than 3 percent. Elsewhere in Asia, Shanghai’s Composite Index closed down 5.1 percent at 4,914.44, and Hong Kong’s Hang Seng fell 5.5 percent to 23,818.86. Again, the biggest fall since the Sept. 11, 2001 terrorist attacks in the United States.

In the United States, with market pessimism at heights not seen in years, it is certainly possible the market is near its bottom. But there are few investors eager to bet on when stocks will resume their climb, and how long it will be before new records are reached again. The Dow is now 14.6 percent below its Oct. 9 record close of 14,164.53, and is less than 100 points away from slipping beneath the 12,000 mark, which it first surpassed in October 2006.

Will the resume of trading on Tuesday will bring some very interesting results on the US Markets? You can bet on it.

It’s no suprise Google, Inc (ticker:GOOG) has been finally seeing a decline from it’s unprecedented advance to an all time high of $747 per share in November 2007 but nobody predicted the rapid descent the stock has seen over the last few days. Google shareholders are scrambling to recover their losses as the stock has lost over 5% and dropped from an opening price of $653 per share on January 14th to a close of $617 per share this afternoon. At one point in today’s trading (1/16/2007), GOOG was down as low as $601 per share and almost fell beneath the $600 per share mark. A glance at Google’s chart for the last three months will emphasize the trend downwards and shows a classic “Head and Shoulders Pattern” which is generally generally regarded as a reversal pattern and it is most often seen in uptrends. It is also most reliable when found in an uptrend as well. Eventually, the market begins to slow down and the forces of supply and demand are generally considered in balance. Sellers come in at the highs (left shoulder) and the downside is probed (beginning neckline.) Buyers soon return to the market and ultimately push through to new highs (head.) However, the new highs are quickly turned back and the downside is tested again (continuing neckline.)

GOOG 30 Day Chart - Showing “Head and Shoulders Pattern”

Glancing at the 1 year chart for GOOG, you can see the current “Head and Shoulders Pattern” pattern was preceded by a huge “Bull Run” leading up to the cuttent levelling off of this rapid climber.

GOOG 1 Year Chart - Showing Bull Run

Finally, if we look at the 5 day chart for GOOG we can see the results of the “Head and Shoulders Pattern” after the bullish uptrend. This one has sell written all over it. Notice the dissipating volume on the “tops”. The first close beneath the neckline was followed by a dramatic sell-off. And check out the big spike in activity on the collapse.

GOOG 5 Day Chart - Showing Downtrend

Why is Google’s stock on such a rapid decline? Call it the rosy scenario syndrome: Analysts expect double-digit earnings growth for a stock over the next few years and the market reacts by buying up a stock at an over-inflated value, thus leading to a rapid decline when the analysts begin to make adjustments in the company’s future. In the abstract, and if the analysts turn out to be right, that’s good news indeed. But the market is especially efficient when it comes to pricing in (or discounting for) growth stories. So, when macroeconomic data or industry-specific news comes along and shakes up the rosy growth story, highfliers like these will drop in a hurry.

Over the last few months, Google has engaged in some high flying press releases that had market makers and industry analysts alike charmed by the potential of this technology darling but like a fickle lover, the affiar is over and Google’s tactics have resulted in a reverse scenario for potential earnings. Coupled with the fact Google has been on the warpath against the webmaster community and competitors, many of whom are now disgruntled ex-shareholders, a recovery is unlikely in the near future and we can expect to see Google’s value depreciate over the coming weeks due to negativity in the blogosphere and webmaster community that will spread into the public sector.

Google versus Webmaster and SEO Community?
For anybody who is unfamiliar with Google and their necessary, yet hostile relationship with the webmaster and SEO community, you must remember that 90% of Google’s earnings are derived from their Adwords advertising program. When Adwords subscriptions are down, the company’s earnings are down. As an Adsense publisher, I have seen the decline in quality advertisments in the Adwords system as displayed on the Adsense ads on my websites. Where a year or two ago, the quality of ads and the revenue generated by clicks on those ads was unrivaled by the competition, 2007 saw many publishers and advertisers both seeking other alternatives to Adwords and Adsense due to misappropriations and unethical business practices by Google. The number of publishers unfairly banned from Google’s Adsense program with their earnings confiscated has only led to an unhealthy resentment for the search giant and many of those banned were also Adwords advertisers and have consequently pulled not only their ads from Adsense but have pulled their clients ads from the system.

Additionally, Google’s unscrupulous attack on bloggers and webmasters who were making a living from sponsored review programs such as PayPerPost and SponsoredReviews, lowering their pagerank and crippling their search engine visibility has led to yet another backlash that will have a permanent negative effect on Google’s future earnings. As if that weren’t bad enough, a week ago, Google announced they were cutting off their Adsense/Adwords referral program to affiliates outside of North America, Latin America and Canada. This move enraged the vast majority of bloggers and webmasters outside that realm because Google essentially took money right out of their pockets for no good reason other than they decided to do it.

Can Google Survive Without the Webmaster Community?
The answer here is a resounding NO. Google is an internet based company and without good working relations within the online community their business model is doomed to failure. Although there is widespread rumours of Google purchasing a significant spectrum of wireless bandwidth and launching a Google-Phone, those rumors are merely a fantasy of loyal shareholders and most likely will not materialize and even if they did, the animosity Google has conjured in the online community will likely mean a monumentous faliure were they to launch such a product or service. The damage to the company’s image has already been done and at this point Google will be lucky to retain the advertising business they currently posess.

What About Google Auctions?
Another widespread rumour from the fountain of mis-information is that Google is going to launch an online auction site to compete directly with auction giant EBay. Once again, the same people who were scorned by Google, webmasters and bloggers, make up a significant amount of Ebay’s membership and it is highly unlikely they will abandon Ebay for a new Google service. Yahoo tried their hand at creating their own auction services and it was a miserable failure because the only people who left Ebay to go to Yahoo auctions were scammers and thieves who were banned from Ebay’s system. If Google launches a similar service, you can bet it will be the criminal element and scammer refugees who will populate the system if and when it goes live.

Essentially, as the old adage goes, Google has “cut off their own nose to spite their face”. Google was built into the biggest search engine on the internet when they were the champiion of the webmaster community. Alienating themselves and damaging the very community they emergedfrom was a costly and ignorant mistake on the company’s part. If you remember the dotcom boom and the subsequent bursting of that bubble, the Web2.0 boom that has been spearheaded by Google and about ready to burst will see it’s flagship going down in flames as an indicator of the death of yet another viscous cycle in the technology industry.

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Technorati Tags for this article: Google, GOOG, Adsense, Adwords, SEO

Even if you’re new to investing in the stock market, you’re probably heard of the term “stock split”, however many new investors are unsure of what the term exactly means, when it happens or how it will impact your investment. Stock splits are a regular occurrence on the exhanges and many investors revel in catching a split because more often than not it means that the future for the particular stock in question will be bright. Many of the most popular stocks have been through splits time and again. Notable stocks that have split are Microsoft, AOL, Oracle, Yahoo and many others.

What is a Stock Split?

A stock split generally occurs when a corporation decides to make more shares of their stock available to shareholders. This is a decision made by the company’s board of directors who often decide split their stock when they believe the current price of their stock exceeds the amount smaller individual investors would be willing to pay for the stock. For example, if a companies stock is currently trading at $100 a share and they would like to make it available to investors at $50 a share, they will do a 2 for 1 split which means that for every share an investor is holding at $100 per share, they will be given two shares at $50 each. There is no loss of value to the individual investor, however a split will generally entice more investors to purchase the cheaper priced stock, thus increasing it’s value in the long run. While a 2 for 1 split is the most common, companies also distribute 3 for 1 splits, 3 for 2 splits, 5 for 1 splits, etc.

What is a Reverse Split?

Sometimes a company will issue what is known as a reverse split. When this happens the shareholder will have less shares at a greater value. For example, the most common type of reverse split is a 1 for 10 split. In this case, if a company has been trading at $1 a share and you have 100 shares, after a 1 for 10 split you will now have 10 shares at $10 per share. The conditions leading up to a company performing a reverse split is usually precipitated by a share price drop to a very low level and the company wants to increase the share price to appear more viable to potential investors. Additionally, if a share price drops below a certain point some exchanges will de-list a stock for 30 days which could have a crippling effect on the company’s future.

The Dow Jones industrials surged more than 200 points in yet another volatile session as investors were ringing with the news that the Abu Dhabi Investment Authority said it will invest $7.5 billion in Citigroup Inc., the largest bank in the US. Who knows why Wall Street is so delighted with the news that Citigroup has sacrificed 5% of their company’s interests to a foreign entity and with the whopping 11% interest on the Citigroup/Abu Dhabi deal, it’s even more of an unappealing situation in the eyes of many long term investors.

A pullback in already inflated oil prices aided the US market’s gains today. A barrel of light, sweet crude dropped $3.28 to $94.42 on the New York Mercantile Exchange based entirely on expectations that the Organization for Petroleum Exporting Countries will raise production at its Dec. 5 meeting (which is highly unlikely).

In other news, Senator Trent Lott, the former Senate Majority Leader, who had been re-elected to a fourth term in 2006, announced his plans to resign before the end of the year. While there is rampant speculation as to the reason Lott has decided to resign yesterday, the truth of the matter is both he and Illinois Republican and former Speaker of House, Dennis Hastert are hoping to land lucrative lobbyist contracts in Washington. With the old ethics rule of one year restriction on outgoing members of Congress from accepting lobbyist poistions being changed to two years as of January 2008, it’s no suprise both Lott and Hastert decided to “cut and run” with their 80% of $175,000 per year pension before signing lurcative deals with Washington lobbyists a year from now. Expect to see more Republicans following Lott and Hastert’s lead and bailing on the Grand old Party.