it might be similar to the nikkei post implosion and the 1965-80 range bound market. ultimately all the analysis doesnt mean much. just have to be quick and stay in the direction of the price. Lot of algorithmic trading is getting sell signals currently. There is some more downside pressure to the usd/yen, nikkei, asian markets, european markets. this type of trauma can really lead to risk aversion, and people seak the safety of cash above anything else. The trades that are being unwound have the common theme of risk aversion at any cost.
excellent comments, but don't forget these things didn't happen overnight! many of these issues have been debated for many months already. I am guessing if there is any crisis the governments around the world have become pretty good at walloping whichever side everyone is leaning on!! Just look at what happened after 9/11 and after the London bombs!! When everyone leans one way, they take the other side and take "everyone's money"!! At least that is my theory IMHO! I am expecting a drop first next week and then a bounce etc http://lauristonletter.blogspot.com/
7 cents in 7 days in yen is expectedly leading to speculation that BOJ will intervene. Paulson arrives in Japan tonight and then on to China.
Exactly. When the rush comes to get out, the knothole won't be nearly large enough for everyone trying to offset their underwater positions.
any major correction and the federal reserve will jump in and cut rates right away. Just 2 weeks ago I posted that there was RECORD margin debt in the markets, approx 270-280 billion, this was of course when the DOW was at 12700+. There are so many new traders above 12,000 that if the markets were to jump back up the first thing they are going to do is sell and run far away from these markets. Its going to take a lot to get this market back to where it was JUST A WEEK AGO. Tomorrow I think the markets drop below 12,000, thats where selling will pick up again.
I agree... anything drastic and the Fed steps in. When it comes to a complete meltdown, for what it's worth, in both 1929 and 1987 the market peaked 55 days prior to "crashing." While anything could happen, I'm leaning toward some additional selling on Monday but some buying into the close and a small move up over the next few days. Just when everybody begins to get comfortable we'll begin to fall apart again. I don't recall the exact figures, but in Barron's today they mention the fact that since 1965 the DJ30 has fallen in excess of 3% on a single day around 42 times... they go on to mention that in (around) 33 of these situations the market was higher 60 days later, by 4.5%+ on average (again, these are approx. figures from my failing memory).
I think a lot of boarders on this topic are getting panicky.... I suspet many may be trapped and are praying hard for a change of trend. Instead of discussing levels for exiting on bounce the discussions have moved towards dooms day scenarios.... cheers
Yes, to follow what the market has already been doing, as always. Other than a possible short covering rally inspired by those inclined to believe in the awesome power of the Fed, it won't really matter, especially in the long run. Japan lowered rates to zero, and their economy was (is) in the dumps for years. When virtually everyone is leveraged 100%, the issue isn't interest rates, it's that consumers can't take on any more payments. Throw in the deflationary psychology of "it'll be cheaper in a few more months" now evident in the housing market, and the problem intensifies. I think there's been a trend change, but I don't think it'll be straight down. A bounce here would relieve the worried bulls and reinforce their belief that all is well. It would also shake out some shorts, scaring them out of their positions. The perfect outcome to mess up both camps. (Sort of like Clint in "A Fistfull of Dollars".)
Have you guys ever seen the video of the guy who puts his head in the crocodile's mouth. The crocodile will not snap its jaws shut unless something touches its tongue. The guy had done this dozens of times to the delight of the crowd. Unfortunately the one day it was very hot and the guy was sweating quite heavily. One of the beads of sweat ran off his forehead and hit the crocodile's tongue. Immediately the crocodile snapped its jaws shut around the man's head. With lots of leverage, they finally pried the croc's jaws opened and rescued the poor bastard. It kind of reminds me of the current market environment. Don't be the one to stick your head in the crocodile's mouth expecting you will be able to pull it back out.
S2K, Bernanke just claimed "no" he won't. http://www.elitetrader.com/vb/showthread.php?threadid=88680