Charting the Crash

[theasxgorilla]

*Funds cashing out to build a war chest. - According to at least one money manager, the evidence is in the oilers being crunched in the face of rising crude. Conclusion - the funds want CASH.

... and look at treasuries. There is mountains of cash going there in the face of a crising interest rate environment as safe haven. Expect some volatility there!

Cut it and shape it any which way you like...funds going to cash and cash going to treasuries means a consensus vote of sorts that for the time being equities has run out of greater fools.

Geez listen to me, I'm actually beginning to sound like a bear.

 

[macca]

I notice the AUD is down to USD .8517 on FX overnight.

That is down over 3 cents in 2 days, that is a huge plunge for the AUD/USD, usually fairly slow mover.

Have to ask why ? usually it would be either our interest rates is going down or the US interest is going up, can't really see either of them happening soon.

So why are $$$ leaving AUD to go to USD, any thoughts ?

From our exporters point of view this is great news, long term the $$$$ for our resource markets just improved BUT we have to get past this correction first !!

 

[Uncle Festivus]

So why are $$$ leaving AUD to go to USD, any thoughts ?

A confluence of contagion maybe? Cycles lining up together? As per Gorilla, flight to 'percieved' safety of treasuries coinciding with an oversold $US shaking out the shorts in a big way. Technical rally underway?

 

[Bushman]

On the Thursday before the crash on Black Monday the UK was hit by the most enormous storm that felled millions of trees. Strange how the UK has just been hit by enormous floods in the middle of Summer.

It is amazing how a risk to the fort brings on a flight from the rational to the irrational. Proves that in the short term, this is a game driven as much by the subconcious (fear, greed) as the concious. Wonder when someone will start quoting Nostradamus...

These type of events always provide a time for reflection. I have not sold down my portfolio as I do not having everything at stake (only a couple of year's worth of bonuses) so can afford to ride this out. With housing prices out of reach for even Gen X's on good salaries, I see the commodities boom as a calculated gamble to earn a deposit and set myself up. I am already 'cash rich' but unfortunately 'asset poor'. That is a due to a juxtaposition of lifestyle choices (just hit my 30's; spent my 20's studying and travelling) and the fact that I live in an age where the ability to afford the primary asset available to my parents generation (ie the family home) is no longer readily in reach. Shares are liquid, have low barriers to entry and, in a commodities super cycle, seem to offer a good risk/reward profile. Time will tell. If there is a repeat of 1987, and the 75% melt down in mining prices occur, then it will be a bad call but at least I have given it a go. If it does happen, I will take my money out of what is left of my riskier profile, pump them into the extremely undervalued BHP and Rio Tinto, and forget about them for 5 years until the psyche around the world recovers and we all ride the wave again. But I am 31 & childless so I can say that as I have a higher tolerance for risk.

As for the current 'correction', Stephen Bartholomeuz has provided an excellent snapshot of the reasons for the current sell down. The issue is if the contagion of the sub prime market spreads first to the prime mortgage market & the banks and then to consumer sentiment. Does anyone really think that banks will start collapsing a la the 1930's? I don't think so in a time of political stability. Is a repeat of the 1980's US credit crunch on the cards? A possibility off-set by the fact that China and India are on their way to becoming massive economies, thus diluting the impact of US consumers tucking their money under their beds again. Time will tell. US GDP growth was 3% this quarter. I will be most interested in the next quarterly US GDP and housing market indices.

Now what would happen if a meteor hit New York?

Good luck guys especially those re-connecting with their inner bears. It is healthy to remind ourselves that the market is janus faced creature. We all knew that the market would have a correction. All markets do. Those two social sciences, economics and psychology, ensure this.


http://www.theage.com.au/news/business/risk-is-always-part-of-equation/2007/07/27/1185339259938.html

 

[noirua]

Everything repeats itself and nothing is new; Whether it be tulip bulbs, dotcom or a raging growth story in China. All it needs is sellers out numbering buyers and charts going back back to the early 1700's, all tell the same story.

What sectors are good, well, none if self feeding occurs as it did in 1929-32 and 1973-75.

It's different this time! No! It's always the same.

The answer is to keep plenty of cash. Well, maybe that's why the slides start.

What stocks are worth holding in a crash? Only those who have lots of cash and little or no debt. Hope and glory stocks will hit the pavement.

On the other hand, maybe there's no worries this time round or even the next. Eventually though, the charts will repeat themselves and the words of Lord Rothschild will be proven right as they were in the 1920 and 1930's. "I always sold too soon", and he later bought the bombed out sectors and made a fortune.

 

[theasxgorilla]

Everything repeats itself and nothing is new;

Price action throughout history may show ups and downs and therefore we continue to have trends...but the underlying mechanics of economic activity are quite different today...so I don't think you can apply last centuries economics to try and explain todays market moves. There are so many layers of derivatives and credit wrapped around and repackaged that measures are distorted (manipulated??) beyond what old economics can presently explain.

Albeit, price action remains king.

 

[wavepicker]

Price action throughout history may show ups and downs and therefore we continue to have trends...but the underlying mechanics of economic activity are quite different today...so I don't think you can apply last centuries economics to try and explain todays market moves. There are so many layers of derivatives and credit wrapped around and repackaged that measures are distorted (manipulated??) beyond what old economics can presently explain.

Albeit, price action remains king.

Economics may have changed, but what makes the markets move (people), have not. It's still hope, fear, and greed in people that propels the markets. These traits have never and will never change. That is essentially why you see the same wave structures and patterns in the market today as were were evident centuries ago.

 

[Sean K]

Economics may have changed, but what makes the markets move (people), have not. It's still hope, fear, and greed in people that propels the markets. These traits have never and will never change. That is essentially why you see the same wave structures and patterns in the market today as were were evident centuries ago.

Hope, fear and greed might cause the waves, but I don't think it drives the underlying long term market trend, which for the past 100 years has been up. This has been caused by free market capitalism which results in companies increasing profits, and will remain so in the long run. This can be a correction, or a crash, but the market will make new highs again. One day. Unless capitalism has failed.

 

[theasxgorilla]

Economics may have changed, but what makes the markets move (people), have not. It's still hope, fear, and greed in people that propels the markets. These traits have never and will never change. That is essentially why you see the same wave structures and patterns in the market today as were were evident centuries ago.

Although, the mechanisms that participants have available today are so much more advanced (scary?). Home equity loans, Index Futures, Housing Futures, CFDs...all new ways for participants to make money appear, make it flow and leverage the impact of their decisions. Maybe this is why correctives are so messy and difficult to count? All the layers of derivatives unraveling...of course, who really knows.

 

[wavepicker]

Kennas,

human progress is forever "upward", ULTIMATELY. But there will be corrections along the way. That's the way it's always been and will be. There is nothing new under the sun.

ASG

Dunno, if the corrections are complex to count these days. I suppose some are and some are not. Certainly in the very liquid markets we still see some very textbook patterns all the time. What is obvious however is that various patterns repeat(even from many years ago), and as such this does show evidence of some type of order.
Take the pattern of the last high int he DJIA for example, there are so many examples of the is pattern thoughout history in many markets(let alone examples on this forum in various threads on stocks and other intruments)

Cheers

 

[theasxgorilla]

Plunge Protection Team either not active or struggling early on today:

 

[Uncle Festivus]

Plunge Protection Team either not active or struggling early on today:

No, just waiting till the last half hour as per last coupla days, as there are a few more holes opening up that they need to put their fingers in to plug the leaks eg buying the $US again, and supressing the gold price no doubt. Geez, those boys will be busy!

 

[dubiousinfo]

Looks like the PPT left early for the weekend

 

[noirua]

Charts are looking increasingly wobbly after the 288 point fall on the Dow on Friday. Markets hate worry and the US sub-prime crisis appears to be worsening. The UK property market is now looking increasingly shakey as falsed sale of houses rose 30% last month and low priced mortgage agreements are about to end very shortly.

Increased selling of stocks, after the recent run up, may take markets back to 2007 lows.

 

[theasxgorilla]

Looks like the PPT left early for the weekend

Hahaha, your not joking...hello Monday morning on the ASX.

 

[Sean K]

Hahaha, your not joking...hello Monday morning on the ASX.

Bought shorts back and bought a long on Thur/Fri. Was gold though, which went UP! Sorry Bean. Perhaps I'll be safe. ish.

 

[theasxgorilla]

Bought shorts back and bought a long on Thur/Fri. Was gold though, which went UP! Sorry Bean. Perhaps I'll be safe. ish.

Its a tug of war. Even when the market is down some stocks are up, and vice versa. I hold Gold and Oil, which by rights should be doing well...but sentiment is stronger than sense right now, it would seem.

 

[dubiousinfo]

I unwound the last of my shorts on friday. Another oustanding decision.

Looks like I'll be giving back what ever profit I made last week.

 

[theasxgorilla]

Sightings of Ben in chopper hovering over The Street already?

 

[wayneL]

Sightings of Ben in chopper hovering over The Street already?

I was thinking the same thing G.