# Big drop today



## el_ninj0 (5 October 2005)

What is going on today? I cant see any reason for this drop, the us market didn't fall this much in its percentage. Its a bit extreme for my liking. Not good, not good at all.


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## krisbarry (5 October 2005)

*Re: Big drop today.*

maybe its the expected rate rise due sometime in 2006, spooking the market, along wth the sharp dip in oil and gold prices.  Plus the expected continuation of rate rises in the U.S. to keep inflation under control


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## finnsk (5 October 2005)

As posted by   el_ninj0

What is going on today? I cant see any reason for this drop, the us market didn't fall this much in its percentage. Its a bit extreme for my liking. Not good, not good at all.


Anybody game to make a prediction on what is going to happen tomorrow


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## wayneL (5 October 2005)

Could be big money exiting the world markets. The US indexes just fell off a cliff last night for no apparent reason at 1:30 EST. 

Cheers


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## TjamesX (5 October 2005)

Could be some buying opportunities out there if it continues. I haven't bought anything for months, currently my holdings have been reduced down to companies that i am happy to hold through anything (as long as their respective businesses hold together) and one more speculative which I've jumped onto today.

If there is a shakeout its going to come down to the individual businesses and industries and how good they are.... pretenders will be dealt with harshly.

Personally industries i like are;

Real resources (not spec)
Energy

and....

Internet services

TJ


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## Yippyio (5 October 2005)

Here is one explanation as of 12.20pm but things did get a lot worse.

It's a case of when the US has a sneese we catch a cold.

FYI

Stocks down as investors book profits
05/10/2005 12:20:45 PM

The Australian stock market continued to fall at noon, with investors moving to book profits following the market's strong run.

At 1200 AEST, the S&P/ASX200 index was 62.2 points weaker to 4581.4 and the all ordinaries was 58.7 points lower to 4532.8.

On the Sydney Futures Exchange, the December share price index contract was down 51 points at 4597.
CMC Markets analyst David Land said today's decline was expected, especially after a weak lead from Wall Street overnight.

"You see some of the major movers downwards and these are some of the names that have been popular over the last few weeks, particularly the gold miners and the energy sector."

"I think from that it is reasonable to say that people are making swift profit taking decisions so they can conserve what they've earned over the past couple of weeks."

Woodside Petroleum was down $1.17 at $34.18 while Santos shed 39 cents to $12.39.

In gold sector, Newcrest Mining was 72 cents weaker at $19.48, Newmont Mining lost nine cents to $6.01, while Lihir gave up 7.5 cents to $1.79.

At 1203 the spot price of gold was $US466 per ounce, down $US1.45 on yesterday's close.

Overnight in the US, concern about rising interest rates saw the Dow Jones industrial average fall 94.37 points to 10,441.11, the Standard & Poor's 500 index slip 12.23 points to 1214.47 and the Nasdaq Composite Index lose 16.07 points to 2139.36.

Mining company BHP Billiton was down 49 cents at $21.71 while Rio Tinto had lost 79 cents to $57.82.

At 1211 AEST, the four big banks were all experiencing losses.

ANZ was down 29 cents at $23.81, Commonwealth Bank giving up 18 cents to $38.52, Westpac was 18 cents weaker at $21.12 and National Australia Bank lost 18 cents to $33.01.

Among the other financials Macquarie Bank had lost $2.04 to $73.23, QBE Insurance Group was 19 cents weaker at $18.29, and AMP shed seven cents to $7.35.

Babcock & Brown Ltd was down $1.91 to $17.77.


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## krisbarry (5 October 2005)

Ouch that was some drop 94.7, that is the biggest one day drop I have seen, ever.

Not that I have studied the all ords much in my time, I am sure others have can vouch for much bigger drops


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## happytrader (5 October 2005)

I reckon anyone who was long the market and took their losses today is an absolute winner! I take my hat off to you!  Sleep well.

Happytrader


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## clowboy (5 October 2005)

Im game for a prediction


More RED tommorow...lots more

Hey Iv'e got a 50/50 chance of being right


Also I would LOVE to know of a site etc that would have info to find out the last time there was a drop this big

Cheers


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## el_ninj0 (5 October 2005)

clowboy said:
			
		

> Im game for a prediction
> Also I would LOVE to know of a site etc that would have info to find out the last time there was a drop this big
> 
> Cheers




I just looked at the XAO chart, and there were similar falls in that last decent sized correction in the market. However there was one period which clearly stuck out on the chart; January 1988 2300 to 1250 point drop(1150 points, 38% drop). Not that say that its anything like that, just thought it was interesting...

I think i'll agree with clowboy, more red tommorow.


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## markrmau (5 October 2005)

I think we almost saw this kind of drop in april's correction. 

Everyone is thinking that tomorrow will be bad, so the market may just confound us with a big short covering rally.

OTOH, notice the breakaway gap?


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## GreatPig (5 October 2005)

krisbarry said:
			
		

> Ouch that was some drop 94.7, that is the biggest one day drop I have seen, ever.



My software gives that as a 2.2% drop. Going back, the first larger drop than that in one day I can see was back in September 2001 where there were two drops a few days apart of 4.2% and 4.7%.

Edit: correction, there was a 2.3% drop in July 2002.

GP


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## brisvegas (5 October 2005)

i think tommorows bias will depend on whether DJI can close above TL support. will evaluate a SPI trade at 5-6am tommorow morn depending on DJI levels.


..................... Pete


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## el_ninj0 (5 October 2005)

Commsecs TEN news QLD report sugested this was only a single day of profit taking and that it probably wont happen again. "The correction we had to have.", as stated by Craig James at Commsec.

Will be interesting to see if it picks up tommorow.


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## tech/a (5 October 2005)

Hmm I was buying at close so I'm banking on a reversal (pretty sharp too) for tomorrow.

Could get burnt, but I thought I was reasonably selective with some Discretionary buys. (Resources)

I think long SPI contract overnight with a stop around 4550 might be a good call.


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## el_ninj0 (5 October 2005)

AFR has a good read about it:

http://afr.com/articles/2005/10/05/1128191776774.html


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## GreatPig (5 October 2005)

el_ninj0 said:
			
		

> AFR has a good read about it:



I don't know about all this thudding back to earth with a vengeance stuff.

It might be the biggest one-day drop for a few years, but it's only taken the XAO back to where it was 2-3 weeks ago. By my chart, it would have to go right back below 4200 to hit any sort of longer-term trend line - and that's about another 300 points.

GP


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## dodgers (5 October 2005)

The October Effect (or sometimes September)

its been a while coming...

I'm thinking a couple of weeks of turbulence and then another big run


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## Julia (5 October 2005)

GreatPig said:
			
		

> I don't know about all this thudding back to earth with a vengeance stuff.
> 
> It might be the biggest one-day drop for a few years, but it's only taken the XAO back to where it was 2-3 weeks ago. By my chart, it would have to go right back below 4200 to hit any sort of longer-term trend line - and that's about another 300 points.
> 
> GP




Exactly, GP.  Think back about six months.  We did not anticipate at this stage the market would reach the level it has.  

To those who took profits yesterday , congratulations.  To those who didn't, don't worry.  Just hang in there.  It always gets better again.

Long time ago I used to worry when my on-paper net worth dropped.  Now I don't.  As long as you've bought quality, it's just like real estate - it will always recover.  Buying companies who pay a healthy dividend with 100% franking helps smooth out one's anxieties during a downturn.

If the worry in the US continues regarding continuing rising interest rate, then we may see faltering market for a while, but even if that's the case, the market will eventually adjust to this factor and recover again.  Just think about the shock to the worldwide markets at the time of the September 11 attacks.  Now this latest Bali atrocity has caused scarcely a ripple.  Sad, but at the same time reassuring to investors.

Julia


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## doctorj (5 October 2005)

I think today was a *massive* over reaction. A single day 2% drop might signal a belief that ongoing profitability at the levels we've seen the last two years won't continue - but lets look at this logically.

Every indication is that Iron Ore prices will rise by a further 10% next year.  No one believes oil is going to return to the days of $11/boe.  Sure, there are inflationary pressures. Sure Greenspan is going.  But surely the indications are that ongoing strong commodity prices should sustain our economy atleast into next year.

Energy stocks were sold off to the tune of 4% today.  Incredible when you consider that oil is still at USD$64/barrel and WPL's reserves are only valued at AUD$5/barrel.  Still plenty of room to move there...


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## wayneL (5 October 2005)

finnsk said:
			
		

> Anybody game to make a prediction on what is going to happen tomorrow




In my experience, after a big down day like this, you will invariably get a stalling day the day after. Failing this (which it almost never does), one of two things happens. Either it bounces or it continues right on down(Both of which are highly likely).:screwy:

hehehe


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## clowboy (6 October 2005)

Well I certainly have to agree that the market has a higher probability of doing the exact opposite of what people expect it to.

I'm still going with another fall tomorrow though and by the way the DOW has started out it doesnt look good.

Thanks to those who came up with some dates and percentages, was much appreciated.


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## brisvegas (6 October 2005)

brisvegas said:
			
		

> i think tommorows bias will depend on whether DJI can close above TL support. will evaluate a SPI trade at 5-6am tommorow morn depending on DJI levels.
> 
> 
> ..................... Pete




no rush to get long for me atm . DJI lost TL supp on daily with 10k the next test  to come looking likely . probably a scalp to be had on some XJO deriv this am but im not playing


.............. Pete


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## wayneL (6 October 2005)

FYI; The last two nights action on the sp500 (up till 3:55 EST)

Looks like my prediction for todays XJO will be spot on hah!


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## tech/a (6 October 2005)

wayneL said:
			
		

> In my experience, after a big down day like this, you will invariably get a stalling day the day after. Failing this (which it almost never does), one of two things happens. Either it bounces or it continues right on down(Both of which are highly likely).:screwy:
> 
> hehehe




So Possible stalling day.
It could bounce,
Or
It could keep on falling.

That just about covers it I think---any options missed?

My punt.
Initial sell off then buying.


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## wayneL (6 October 2005)

tech/a said:
			
		

> So Possible stalling day.
> It could bounce,
> Or
> It could keep on falling.
> ...




Heheh Just a bit of silliness. It pays to have a sense of humour when trading, I think. :silly:


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## brisvegas (6 October 2005)

DJI chart looks bad with in all probability more downside to come


............... Pete


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## excalibur (6 October 2005)

brisvegas said:
			
		

> DJI chart looks bad with in all probability more downside to come
> 
> 
> ............... Pete



Hi Brisvegas,
Unfortunately fuel consumption in the states has diminished 3 % over the last past month and has been making oil hedging and retailers nervous. I think there will be a bit of assesting in investments. Everybody is forgetting about the help Bush is giving oil exploration and production although. I`ve been analyzing a few companies that where in the cellar over the past year like penn octane, she sprang up 25% on Tuesday.
After so much good news, a bit of bad news is healthy for the market.
Happy Buying
Excalibur


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## Hanrahan (6 October 2005)

It is October. Think Oct '87. The Yanks are always nervous around this time.

If we do get a serious drop, don't rush to bottom pick. (You know abt dirty fingers) Unlike '87 there will be little technical influence in the fall, it will be a true secular bear.


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## el_ninj0 (6 October 2005)

doctorj said:
			
		

> Energy stocks were sold off to the tune of 4% today.  Incredible when you consider that oil is still at USD$64/barrel and WPL's reserves are only valued at AUD$5/barrel.  Still plenty of room to move there...




I totally agree doc, the oil companies are going to get hit further today, only because they did in the US market over night. We are in for a leveling out i think, like tech/a said though, probably a slight fall and then a bit of buying back leading to a smaller drop at the end of the day.

On a positive note, I think the mining companies that rely on oil to do their mining will be in a good position to go up, i.e. Base Metals, Iron Ore, Precious Metals....

Good luck to you all today, I think we will need a bit...


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## Yippyio (6 October 2005)

Hi Tech/a

I guess you got stopped out last night  :swear: 


The ASX has not had a single days drop like this since 9/11

The market has had a very strong run this last two weeks and basically is now back to where it was 8 days ago.

Yesterdays drop is the equivalent % to the last two days decline on the DOW.


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## tech/a (6 October 2005)

Good thing I dont trade the SPI.

My main Portfolio is getting a hiding at the moment but still well within allowable parameters.Just that the correction is so fast that everyone is screaming.Had it been over a longer period perhaps it wouldnt have the same anxiety.

Short term discretionary trades are the problem.
I'll get hit here too as I like to keep stops really tight and in cases like this I wont let them run more than - 10% on initial buy price.
Thats likely on some.

Just another day trading gotta take the good with the bad.


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## finnsk (6 October 2005)

As a newbie to the share market i do understand that it is very difficult to make a prediction on the market or today, as i understand there is many possibilities for what can happen, it is a bit like gambling, i do not mean that in a bad way, you do all your researce and think you are on a winner and then all of a sudden it goes the other way. :swear: 

Thanks to all of your messages very appriciated.


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## clowboy (6 October 2005)

Kind of old news now but heres is the stats....



Yesterday the Australian stock market experienced its biggest one day fall in more than three years as concerns about future US interest rate rises and a softer oil price took their toll.

The S&P/ASX200 index plunged 100.1 points or 2.16 per cent to 4543.5 while the all ordinaries slumped 94.7 points or 2.06 per cent to 4496.8 points.

Both indices suffered their biggest one day percentage fall since July 24, 2002


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## el_ninj0 (6 October 2005)

Well, its certainly got a nice start to the day. 70points down 20 minutes into trading.


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## Kauri (6 October 2005)

XAO...I wonder if it will retest L/T line...


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## DTM (6 October 2005)

el_ninj0 said:
			
		

> Well, its certainly got a nice start to the day. 70points down 20 minutes into trading.




Looks like its found support on 4464 which is a major long term support line so look for the bounce.   Sorry, charts will update in next couple of hours. 

Yesterdays fall was on a gann date too.

Theres going to be a lot of volatility in the next couple of weeks.  This is where theres going to be a major battle between the bears and bulls.  

My tip, the Bears to win.


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## Battman64 (6 October 2005)

Nice work DTM


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## tech/a (6 October 2005)

Coming off its lows now I think.
Was 73 now in high 60s

Out with the cheque book.


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## el_ninj0 (6 October 2005)

tech/a said:
			
		

> Coming off its lows now I think.
> Was 73 now in high 60s
> 
> Out with the cheque book.




Definetly, get in while its hot.


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## DTM (6 October 2005)

tech/a said:
			
		

> Coming off its lows now I think.
> Was 73 now in high 60s
> 
> Out with the cheque book.




Look for a trading range of todays low and the high of the market to make your entries and exits (with enough margin for error.) in the next couple of weeks   



Edited.


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## tech/a (6 October 2005)

Most read I've seen in a while.


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## Fleeta (6 October 2005)

Tech, what on earth is MUL doing on your list! I thought you were anti-MUL?

There isn't much without red ink today.


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## tech/a (6 October 2005)

Its there so I can watch how poorly it performs and gives me ample warning to post on the Mul thread.

PNO will get a birth soon the way its going.!!


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## Yippyio (6 October 2005)

IT's a BLOOD BATH !!!

 :shoot:     :bigun2:


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## markrmau (6 October 2005)

Not wanting to sound stupid 

but part of the reason we are being pummeled is because of US interest rate fears. This would lead to hedge funds pulling back from resourses etc. The aussie economy is heavily dependent on mining, so we are up the creek.

The only problem is that metals seem to be doing fine. 

http://www.kitcometals.com/charts/
http://newsvote.bbc.co.uk/1/shared/fds/hi/business/market_data/commodities/11701/default.stm


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## Kauri (6 October 2005)

Does the cat have another bounce in it???   :goodnight


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## wayneL (6 October 2005)

Anyone contemplating the big *C*?


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## Bronte (6 October 2005)

Hehe!   
Up the stairs....Out the window!


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## wayneL (6 October 2005)

US Index futures are ticking down atm.

Unusual for this hour.

Bears have got the bulls by the throat methinks.


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## markrmau (6 October 2005)

Am I reading the SPI futures right? Futures after close: 4429, with xjo closing at 4447


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## TjamesX (6 October 2005)

XAO is down around 4.6% from high in two days. Its a bit easier to watch it all with some cash on the sidelines but it's still a hairy ride.

Good to see you still there with the big C word WayneL   

I'm not sure if this is 'it' or if there will be an 'it' - I'm looking for some value out there and have increased shares weighting from < 30% to almost 50% in the last two days. But i don't think I'll go too much past that in the current environment.

Still very bearish about local economy in general in the next 2 years. I think a lot of the hard questions will be asked with respect to supply side inflation (for all western economies). I think inflation is coming and there isn't much the RBA will be able to do about it - the question is will they try to do something about it any way??

 

out of interest;

http://www.smh.com.au/news/business...-into-a-shocker/2005/09/27/1127804477726.html


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## krisbarry (6 October 2005)

I couldn't stand another day with the sight of red arrows.

Took the rest of the day off and headed down to the beach with a mate and had fish n' chips on the foreshore. Awesome day!

At least the sea gulls had a feed.


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## happytrader (7 October 2005)

I thought stop losses were for times such as these.  Are'nt they there to stop us rationalising, hoping, wishing and praying?  Lets all get real and live in the moment!  Lol.

Cheers
Happytrader


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## dutchie (7 October 2005)

What a great picture, Kris

Very calming. Can see myself sitting at a foreshore cafe drinking a cappo.


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## RichKid (7 October 2005)

wayneL said:
			
		

> Anyone contemplating the big *C*?




Hey Wayne,
Too early for it surely from a TA point of view? This is one strong bull run and it's survived many corrections, can't really crash til it goes through a couple of support levels, 4400 is the next moderate stopping point, we have the previous high from the last bit of drama early in the year to prop us up even further down.

All the closet bears are out now I'm sure. Suffered a bit of slippage with my stops but overall looking okay- losses are inevitable, easier to take when everyone else is feeling the hurt too in a way.


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## wayneL (7 October 2005)

RichKid said:
			
		

> Hey Wayne,
> Too early for it surely from a TA point of view? This is one strong bull run and it's survived many corrections, can't really crash til it goes through a couple of support levels, 4400 is the next moderate stopping point, we have the previous high from the last bit of drama early in the year to prop us up even further down.
> 
> All the closet bears are out now I'm sure. Suffered a bit of slippage with my stops but overall looking okay- losses are inevitable, easier to take when everyone else is feeling the hurt too in a way.




Oh yes, way way too early to call a crash.

But the '87 crash did the same thing, just fell out of the sky...i'm just getting a bit carried away really. hehehe


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## wayneL (7 October 2005)

wayneL said:
			
		

> Oh yes, way way too early to call a crash.
> 
> But the '87 crash did the same thing, just fell out of the sky...i'm just getting a bit carried away really. hehehe




Here is the chart


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## sam76 (7 October 2005)

That is NASTY.


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## GreatPig (7 October 2005)

Unless you're short...


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## clowboy (7 October 2005)

Thanks for that chart WayneL

Very interesting


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## GreatPig (7 October 2005)

Seems like in times of trouble diamonds are a trader's best friend 

GP


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## Yippyio (11 October 2005)

Our market does the red baron once again. The drop is not limited to one sector but right across the board


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## el_ninj0 (11 October 2005)

Anyone know what the analysts have said today? i.e Comsec, NAB, Westpac?
Usually they have something not so useful to add on days like today.

The market took another severe beating, and its starting to worry me a bit i have to say. Hopefully tommorow will bring something good onto the books.


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## dutchie (11 October 2005)

El 

Will probably depend on tonights DOW being up.

The Americans seem to have lost confidence and are afraid of inflation (probably with good cause).

We don't have that worry at the moment and our economy appears to be in reasonable shape. Also we have lots of good resources below the ground, even though we don't take very good care of the top, that the rest of the world are keen to get their hands on.

We have cast off the British, I wonder how long it will take us to cast off the USA, especially as far as our stock market is concerned.


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## happytrader (11 October 2005)

Hello there!

Colin Twiggs of www.incrediblecharts.com puts out an excellent trading diary where he covers the state of world indices including the xao, gold, treasury yields and their possible direction for the week.  It is free and you can access it immediately.

Cheers 

Happytrader


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## SmallStocks (11 October 2005)

"October has had the highest degree of volatility in the Australian market and this was increased today due to more pressure from the US overnight, regarding US interest rates fears and spiraling concerns about inflation......Trading in the US also finished lower overnight with General Motors Corp losing nearly 10% of their value due to Delphi Corps bankruptcy filing - this led both the Dow Jones Industrial and S&P indexes to close lower and potentially head towards five month lows."


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## It's Snake Pliskin (11 October 2005)

dutchie said:
			
		

> We have cast off the British, I wonder how long it will take us to cast off the USA, especially as far as our stock market is concerned.




Please explain dutchie.


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## It's Snake Pliskin (11 October 2005)

I see it as being healthy for the market if we have a topsy turvey month. Does it need to keep going up overstretching realistic value? Give me a few more good drops to find some good value.


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## tech/a (11 October 2005)

Snake Pliskin said:
			
		

> Please explain dutchie.




The US sneezes we get a dose of the FLU.


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## krisbarry (11 October 2005)

Thats why Bush wants our Relenza (BTA)...LOL

I do not hold.


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## Milk Man (12 October 2005)

dutchie said:
			
		

> El
> 
> Will probably depend on tonights DOW being up.
> 
> ...




We give resources to China- they turn them into SUV's and such and give them to America. If Billy-Bob caint buy his new truck we aint get no money.


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## tech/a (12 October 2005)

Milk Man said:
			
		

> We give resources to China- they turn them into SUV's and such and give them to America. If Billy-Bob caint buy his new truck we aint get no money.




Not quite.

The Yanks arent as stupid as we are.
90% of their vehicals are home grown.Imports are a rare breed.
Not only domestic but also commercial vehicals.
Farm and earthworks equipment.

Other than raw product,the Yanks import very little that their own country cannot produce.They arent rich because they import.

How do you think Holdens and Ford would go in Australia if there were fewer imports?


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## Milk Man (12 October 2005)

tech/a said:
			
		

> Not quite.
> 
> The Yanks arent as stupid as we are.
> 90% of their vehicals are home grown.Imports are a rare breed.
> ...




Good point. I was just saying that China consumes resources from Australia and the US consumes consumables from China. Could've used a different example. Economists seem to think this is the driving force behind China's economy from what I can gather.  So you're saying this is not the case? Not saying youre wrong: I dont know the numbers myself. Those harvard types get it wrong half the time anyway!

Totally agree that holden should build its cars all here! (thats what you meant?) That way we'd have a Double Over-Head Camshaft Aussie V8 instead of that Gen III heap of crap. Holden had one designed and everything!


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## tech/a (12 October 2005)

Yes milky,basically importers are poor and exporters rich.
Just ask the arabs.
Balance of trade?---how do governments pay their debts?
How do countries stay rich---by producing (Manufacturing) AND exporting.
China NOW has the idea! Wont be long and the Chinese will be saying "God Bless America!!--
Shown the way by the Yanks--*could backfire though!!*

Like most of the "thoughtful medling things the Yanks stick their nose into"


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## Yippyio (13 October 2005)

tech/a said:
			
		

> Not quite.
> 
> The Yanks arent as stupid as we are.
> 90% of their vehicals are home grown.Imports are a rare breed.
> ...




Hi Tech/a

The US may not import the majority of their vehicles but the highest selling motor vehicle, by units is Toyota. The days of the US motor industry are numbered with all US manufacturers struggling to compete and are rapidly losing market share.

I am not sure what percentage of GDP the motor industry accounts for but the US imports 85% of their consumerables i.e. clothing, electrical, fragrences, cosmetics etc.

The majority of our resource exports to China is being absorbed by China's domestic demand, not for their export manufactoring demand. China is experiencing an industrial revolution fuelled by an emerging middle class who's numbers have created a market double in size to the US.

To give you some perspective of the building that's going on in China, a 3rd of the worlds concrete production is currently being imported by China.


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## Smurf1976 (13 October 2005)

But wouldn't China's domestic economy run into trouble if the US stopped importing so much from them? Much like Australia's domestic economy would run into trouble without resource exports?


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## Yippyio (13 October 2005)

Smurf1976 said:
			
		

> But wouldn't China's domestic economy run into trouble if the US stopped importing so much from them? Much like Australia's domestic economy would run into trouble without resource exports?




Why would Americans all of a sudden stop consuming? They wouldn't. artyman:

Imports are made up of various industrial sectors, a slow down in one sector may mean a pick up in another, thus having a neutral effect on overall import/ exports.   

A slow down in the US means 3% growth instead of 3.5%, negligible and hardly going to worry Chinese Manufacturers.   :samurai:


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## Yippyio (13 October 2005)

11.00am and the ASX is getting hammered once again. A slight drop in the US translates into a slaughter on the ASX.


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## wayneL (13 October 2005)

Yippyio said:
			
		

> Why would Americans all of a sudden stop consuming? They wouldn't.





Unless they do. Unless they have to. Which they will.

I won't bore you with an extended regurgitation of the facts, but the US is an accident waiting to happen.


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## RichKid (13 October 2005)

wayneL said:
			
		

> Unless they do. Unless they have to. Which they will.
> 
> I won't bore you with an extended regurgitation of the facts, but the US is an accident waiting to happen.





ROFLAO!!! That's a classic Wayne! Reminds me of Gary Larson's Far Side jokes. It's a shame that real people get hurt when things go wrong in financial markets.


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## Kauri (13 October 2005)

There has been a lot of talk about the amount of credit that supports the 
American populations lifestyle, but I think it is nothing compared to the debt that supports the American administrations lifestyle. I dont know what comes after trillions, but the US Governments credit card debt must be close to it. If the populations spending gets out of hand ,why just raise the interest rates, that will slow them down, if the administrations spending gets out of hand, why just raise the interest rates, that will attract more overseas money.     
   Will they ever be able to pay it off?
   Will the Asian economies that are effectively supplying this credit ever start to turn the tap off?
   What will happen to the great American dream if it is?
   What happens to Australia if America has to start living within its means?
   Why worry, it will never happen, just get another credit card!!!!    
   Just joking... of course..   :goodnight


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## Smurf1976 (13 October 2005)

Yippyio said:
			
		

> Why would Americans all of a sudden stop consuming? They wouldn't. artyman:
> 
> Imports are made up of various industrial sectors, a slow down in one sector may mean a pick up in another, thus having a neutral effect on overall import/ exports.
> 
> A slow down in the US means 3% growth instead of 3.5%, negligible and hardly going to worry Chinese Manufacturers.   :samurai:



Recessions are a normal part of the economic environment and happen from time to time. The question is thus _when_ the US will next have a period of negative growth, not _if_. It is near certain that at some future date the US will be in recession. 

This could be a problem for Chinese manufacturers since their economic planning is presumably based on the notion of constant growth (what else would it be based on?).

And I think it must also be considered that (1) China itself is not immune to economic cycles and at some point they will have a bust and (2) Australia is likewise affected by economic cycles.


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## Yippyio (13 October 2005)

Smurf1976 said:
			
		

> Recessions are a normal part of the economic environment and happen from time to time. The question is thus _when_ the US will next have a period of negative growth, not _if_. It is near certain that at some future date the US will be in recession.
> 
> This could be a problem for Chinese manufacturers since their economic planning is presumably based on the notion of constant growth (what else would it be based on?).
> 
> And I think it must also be considered that (1) China itself is not immune to economic cycles and at some point they will have a bust and (2) Australia is likewise affected by economic cycles.




Mmmm...........We have alot to worry about don't we, not to mention global warming, El nino, Green House........eeek, I think I will just go and lay down now the stress is getting to me.  :22_yikes:


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## johnno261 (13 October 2005)

More of this correction to follow. Red Day again tomorrow no doubt!


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## Yippyio (13 October 2005)

johnno261 said:
			
		

> More of this correction to follow. Red Day again tomorrow no doubt!




Just watch what the US does, if it comes off slightly double the percentage and that's probably what we are in for.

The fundamentals of Australian companies have little to do with whether the ASX moves up or down at the moment, it's all about about US interest rates, last week it was Hurrican Katrina, the week before it was Hurricane Rita, before that it was oil and is'nt it expensive these days.

What's the next cause for concern ?, another hurricane perhaps or as in the case of last nights movement on the DOW, another US car manufacturer facing a 12 billion dollar bill over the Delphi bankruptcy.....so what !!!

Would someone please explain what all of this really has to do with the us ???     
 :swear: 

It seems our fund managers are very nervous at the moment, virtually looking at any excuse to dump stock. It would be interesting to see how much of their decision was based on the actual Australian fundamentals or simply whether the DOW is going up or down :sheep: 

as in "Oh, the DOW is off, we better dump some stock today".


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## wayneL (13 October 2005)

Yippyio said:
			
		

> Just watch what the US does, if it comes off slightly double the percentage and that's probably what we are in for.
> 
> The fundamentals of Australian companies have little to do with whether the ASX moves up or down at the moment, it's all about about US interest rates, last week it was Hurrican Katrina, the week before it was Hurricane Rita, before that it was oil and is'nt it expensive these days.
> 
> ...





The US economy does lead the world economy whether we like it or not, and the health of the US influences all of us, either directly or indirectly. If.......no, when the US economy tanks, so will we,China or no China, end of story.

Aussie valuations aren't cheap enough to ignore this. I don't get where people think the ASX is cheap. P/E < 10 is a "getting cheap". 15 is top dollar unless there is some extraordinary growth story.

7 is cheap, though we haven't seen this for a while....maybe thats the problem. There is a whole generation of investors who have scarcely ever seen P/E's < 12.


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## Smurf1976 (13 October 2005)

wayneL said:
			
		

> The US economy does lead the world economy whether we like it or not, and the health of the US influences all of us, either directly or indirectly. If.......no, when the US economy tanks, so will we,China or no China, end of story.
> 
> Aussie valuations aren't cheap enough to ignore this. I don't get where people think the ASX is cheap. P/E < 10 is a "getting cheap". 15 is top dollar unless there is some extraordinary growth story.
> 
> 7 is cheap, though we haven't seen this for a while....maybe thats the problem. There is a whole generation of investors who have scarcely ever seen P/E's < 12.



You've hit the nail on the head there wayneL. 

There are lots of people around at the moment who think P/E's of 25 in stocks and property rental yields of 3% are normal. They are NOT normal by any historical measure. 

All I can say is that markets revert to the mean and the only question is how they get there. Either dividends / rent go up or capital values come down.

Now, if only my crystal ball told me which one and when.


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## clowboy (13 October 2005)

NICE comic

Very nice, says alot


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## Yippyio (13 October 2005)

wayneL said:
			
		

> The US economy does lead the world economy whether we like it or not, and the health of the US influences all of us, either directly or indirectly. If.......no, when the US economy tanks, so will we,China or no China, end of story.
> 
> Aussie valuations aren't cheap enough to ignore this. I don't get where people think the ASX is cheap. P/E < 10 is a "getting cheap". 15 is top dollar unless there is some extraordinary growth story.
> 
> 7 is cheap, though we haven't seen this for a while....maybe thats the problem. There is a whole generation of investors who have scarcely ever seen P/E's < 12.




Agreed on the US economy leading the world, just frustrating. 

Part of the frustration is the media today, which I believe are partly responsible for inflated P/E ratio's, stocks get hyped through media and the media is vulnerable to manipulation partly because it's always about the next big story, this is the 21st century and the media's part in hyping a good story or a bad story is only going to grow. 

The US has been having hurricanes forever, 30 years ago we would have never have even known that a hurricane was terrorising the gulf of Mexico, it would not have been reported, here in OZ and would not have been a blip on the ASX radar.

These days it's front page news all over the world, with regular updates on the hour.

I guess the media play their part in producing a far more volitile market, unfortunatley the problem is if you say something enough times it is sure to become a self fulfilling prophecy.


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## Smurf1976 (13 October 2005)

Yippyio said:
			
		

> I guess the media play their part in producing a far more volitile market, unfortunatley the problem is if you say something enough times it is sure to become a self fulfilling prophecy.



We live in an age where even primary school children have watched numerous hours of what amounts to:

"The stock market is risky so you must always have your finger on the sell button and you have to watch the market all day",

"Currency markets are unpredictable so nobody makes money trading forex because it just isn't possible. Even the banks and the government don't have a clue how the market works. Nobody really understands forex. The National Australia Bank had a go at it and, just to prove our point, lost a fortune",

"But you can't go wrong with property and that's why you should leverage it to the limit even if that means a bit of creative accounting with the figures you give to the bank and then you just borrow more (equity withdrawal) when the guaranteed price increase happens. And we're in a new paradigm where interest rates will never go up more than 0.25% from what they were when you took the loan out"

investment advice courtesy of commercial television. So don't expect too much sense in the market.


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## It's Snake Pliskin (13 October 2005)

Smurf1976 said:
			
		

> We live in an age where even primary school children have watched numerous hours of what amounts to:
> 
> "The stock market is risky so you must always have your finger on the sell button and you have to watch the market all day",
> 
> ...





With regards to property investing there is a propensity for negative gearing in this country. Foolish!


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## wayneL (14 October 2005)

Smurf1976 said:
			
		

> You've hit the nail on the head there wayneL.
> 
> There are lots of people around at the moment who think P/E's of 25 in stocks and property rental yields of 3% are normal. They are NOT normal by any historical measure.
> 
> ...




I've just been forwarded an email from a US tip sheet, where a PE of 13 was considered "INSANE" and one should back up the truck and load up. The stock had recently halved in value.

Well, NO THANKYOU Mr. Wall St Tipster! Let it halve again and I might be interested...maybe.

OK, this doesn't preclude me from trading the crap out this dog, but my bottom drawer has been collecting cobwebs for one helluva long time now.


CHeers


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## Yippyio (14 October 2005)

wayneL said:
			
		

> I've just been forwarded an email from a US tip sheet, where a PE of 13 was considered "INSANE" and one should back up the truck and load up. The stock had recently halved in value.
> 
> Well, NO THANKYOU Mr. Wall St Tipster! Let it halve again and I might be interested...maybe.
> 
> ...




Anything with a PE of less then 13 means that either the company has a hopeless PR strategy or there is not alot of blue sky or that they are in a declining market. I would prefer to place my money in something which is in a little more favour like a PE of between 15 & 20


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## Milk Man (14 October 2005)

Re: the media.
Spot on smurf! If these reporters are so good at handling money, where's their lear-jet and 50m boat?


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## wayneL (14 October 2005)

Yippyio said:
			
		

> Anything with a PE of less then 13 means that either the company has a hopeless PR strategy or there is not alot of blue sky or that they are in a declining market. I would prefer to place my money in something which is in a little more favour like a PE of between 15 & 20




I think it means the share market is chronically overvalued.

To put into perspective:

If I was looking at buying a pty ltd that was earning $50,000 nett profit under management, I would be looking to pay *$750,000* at pe 15 or *$1,000,000* at pe 20.

*Not this little black duck!*

{this has nothing to do with trading. I'm talking about bottom drawer investments here}


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## Yippyio (14 October 2005)

PE ratio's do seem to have crept up and 15 - 20 is fairly normal and accepted these days. 

I think media have played a role in this, ramping stocks (I blame just about everything on the media) but also dividend strategies have become more sosphisticated making certain companies more attractive to prospective income investors. The more of these people you have jumping on board the higher the PE ratio. If you announce an 80% dividend payout ratio watch your SP jump.


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## RichKid (14 October 2005)

wayneL said:
			
		

> If I was looking at buying a pty ltd that was earning $50,000 nett profit under management, I would be looking to pay *$750,000* at pe 15 or *$1,000,000* at pe 20.
> 
> *Not this little black duck!*
> 
> {this has nothing to do with trading. I'm talking about bottom drawer investments here}




Sounds logical to me, if you're going to pay a premium there must be a very good reason for it, especially if you're a Warren Buffet follower. The issue is that it's all relative, is 15 low? or is it high? why?? 

The missing ingredient I suppose is doing due diligence to make sure the business is on its way up rather than down, a pe alone wont show that. Too much work for me to examine fundamentals only, hence trading for me.


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## tech/a (14 October 2005)

RichKid said:
			
		

> Sounds logical to me, if you're going to pay a premium there must be a very good reason for it, especially if you're a Warren Buffet follower. The issue is that it's all relative, is 15 low? or is it high? why??
> 
> The missing ingredient I suppose is doing due diligence to make sure the business is on its way up rather than down, a pe alone wont show that. Too much work for me to examine fundamentals only, hence trading for me.





HMMMM Wayne I have a Company you maybe interested in.

OH where did you find that picture of me?


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## It's Snake Pliskin (15 October 2005)

wayneL said:
			
		

> I think it means the share market is chronically overvalued.
> 
> To put into perspective:
> 
> ...




BXP has a low P/E ratio. I hold and see this as a stock of the future. It's currently 27 -28cents and will only get better.

Check this one out and "make your research" , as chicken used to say.

I'm not ramping just proving there is value to be found.


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## el_ninj0 (19 October 2005)

What more can i say except that day traders in this country are absolute retards. 40 points over reaction to a 60point loss on the DOW.


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