Correction or crash?

[Miner]

A bit early to be calling a bottom I would think.

While I think we will get some sort of rally in the next week or so I seriously doubt it will be the bottom or the last time we test the 5500-5700 area at the very least.
The bar from 18.12.07 has a lot of similarities to todays bar and look at the weak rally we had afterwards.

IMO it is a crash. The prices have gone down about 15% in last few weeks. Probably the down fall is worse than 1987 crash. Things are different now so no one is calling a recession but economy fall, constant correction but not crash, not murder but wilful fatal damage- all jargonistics. No one has said so far in intellecutal forums - what are the signs of a crash ? Closure of stock exchange ? If Citi Gold, Centro and similar others are not failed businesses then what need to do more to call a business failed.

Any way a matter of opinion

Regards

 

[Kauri]

only joking... really... :couch


Cheers
..........Kauri

 

[cordelia]

I like the tag R.O.E. must be 20 years since I saw that written anywhere appropriately . I think that's the heading for the next investment boom ROE .

Personally I think in this market you have to trade in and out over a short term. Its too risky holding stocks over a long period of time. its fine saying they will recover but how long will it take and all the time it takes your money is tied up just waiting to return to levels where you break even. Better to cut your losses and get your cash working for you on another stock. I have changed my trading strategy completely over the last month. In and out over a short time..smaller profits but more of them...same mentality as the $2 shop

 

[cordelia]

IMO it is a crash. The prices have gone down about 15% in last few weeks. Probably the down fall is worse than 1987 crash. Things are different now so no one is calling a recession but economy fall, constant correction but not crash, not murder but wilful fatal damage- all jargonistics. No one has said so far in intellecutal forums - what are the signs of a crash ? Closure of stock exchange ? If Citi Gold, Centro and similar others are not failed businesses then what need to do more to call a business failed.

Any way a matter of opinion

Regards

Interesting you should say that because last night on the news it was mentioned that on the day of the 1987 crash the dow fell 1100 points and that whilst we have had no such sudden fall in our market since then our market has fallen steadily since November 07 a total of 1000 points. same decline but less dramatic.

I think it is important to recognise that our world is very different from 1987. We have the Internet which has completely changed how people trade and the access to information that is available to the general public.

 

[bunyip]

IMO it is a crash. The prices have gone down about 15% in last few weeks. Probably the down fall is worse than 1987 crash. Things are different now so no one is calling a recession but economy fall, constant correction but not crash, not murder but wilful fatal damage- all jargonistics. No one has said so far in intellecutal forums - what are the signs of a crash ? Closure of stock exchange ? If Citi Gold, Centro and similar others are not failed businesses then what need to do more to call a business failed.

Any way a matter of opinion

Regards

It doesn't even come close to the 87 crash which fell 25% in one day and 50% overall.
Whether or not we call it a crash is irrelevant....it's a bear market and as Wayne pointed out, it's business as usual for technical traders who have tremendous profit opportunities available to them by shorting stocks, or using put options.

Bunyip

 

[bunyip]

Interesting you should say that because last night on the news it was mentioned that on the day of the 1987 crash the dow fell 1100 points and that whilst we have had no such sudden fall in our market since then our market has fallen steadily since November 07 a total of 1000 points. same decline but less dramatic.

I think it is important to recognise that our world is very different from 1987. We have the Internet which has completely changed how people trade and the access to information that is available to the general public.

If we're going to compare this slump to the 87 slump then we need to look at percentages, not points. In relative terms, a 1000 point drop in the current market is much smaller than a 1000 point drop back in 87.
Nevertheless, the charts clearly show that this is a bear market (progressively lower peaks and troughs, price is well below the 200 day moving average, which is widely regarded by professional and institutional traders as the benchmark for identifying bull and bear markets).

Bunyip

 

[Awesomandy]

only joking... really... :couch

I like that one.

as Wayne pointed out, it's business as usual for technical traders who have tremendous profit opportunities available to them by shorting stocks, or using put options.

I agree. Good traders make money from both sides of the market. As long as it moves, there's money to be made. (-and lost as well, but let's not talk about that one).

I think this is a good time for the long term investors as well. I haven't done much research on this, but it seems to me that, generall, high quality shares that were oversold in past corrections/crashes would recover relatively much quicker than the shares of the companies that had weaker fundamentals. In a strong bull market like the one we had recently, a lot of shares went up, so stock picking didn't really matter too much, as there were still money to be made. Now, I can see that picking good stocks will be much more important, as this will be the difference of making money or losing money in the medium/long term for investors. As I've said earlier, now that the markets have dropped almost 20% from top to bottom, it is almost time to start re-aligning long term portfolios for the next market phase.

 

[arminius]

of course lose comparisons to the past is problematic, simply because of india, china etc driving the global dollar. industrialisation on this scale has simply never happened before.
buy in gloom, sell in boom.
gee its gloomy at the mo.

 

[Smurf1976]

I think it is important to recognise that our world is very different from 1987. We have the Internet which has completely changed how people trade and the access to information that is available to the general public.

Also worth considering who is in the market in 2008 versus 1987.

Most people didn't own shares in 1987. For that matter, most didn't know how they would actually go about buying shares and didn't have a clue what a broker did other than it being "something to do with the share market".

Rich people, institutions and a very small percentage of the general public, many of them no doubt having some sort of formal financial education, owned shares in 1987. Those and proverbial aunt who was left some BHP shares and had in the back of their mind that they'd ask the local bank manager for advice on how to go about selling the shares if they needed the money.

1987 - most people kept their savings in banks.

2008 - people are more likely to own shares in a bank than keep their life savings in one.

IMO that's a rather significant difference overall. A lot more non-financially educated people own shares now. And they know more about how to use the computer to buy/sell than they do about the actual shares or finance in general.

If we do get a real crash then IMO there will be two key features. Firstly, the actual crash. Secondly, the brokers and quite likely the ISP's as well go down (in a technical computer sense) as literally millions of Australians all try to log into their accounts at the same time. Very few will actually get to place their orders. Even fewer will actually sell their shares at any price.

All happened before of course. Last time though in 1929 it was people rushing physically to the stock exchange. Now they've got a fancy communications system to crash as well as the market.

As for the actual martket though, I'm a long term investor based on fundamentals. In the case of oil stocks for example (of which I hold plenty), there hasn't been a major discovery or technological breakthrough to change the long term fundamentals that at potential demand exceeds supply and the gap continues to widen. A recession may slow demand growth but even the Great Depression wasn't anywhere near bad enough to actually send oil demand backwards - indeed it was a period of strong growth bar one or two years. Hence I won't be selling.

Long term, Smurf's prediction is pretty simple. We get a deflation scare of sorts in 2008 - looks like it will at least partly involve the stock markets. Then the central banks step in and do what they do best - inflate, inflate and inflate some more. Cash isn't as safe as many may think IMO for that reason.

 

[explod]

of course lose comparisons to the past is problematic, simply because of india, china etc driving the global dollar. industrialisation on this scale has simply never happened before.
buy in gloom, sell in boom.
gee its gloomy at the mo.

Depends on the outlook, "buy in gloom..." is an adage based on good sense, and there are many angles of course. My take:-

I was very happy to snap up Oxiana yeserday when in my view it was really oversold. Over night gold has firmed a bit and copper, in which there is a huge world shortage, went up 3.4% overnight also. With needs for electric motors in alternative energy and continued high tech developments in the exapansions of India and China, OXR has to be one of the very best on the ASX. I am sure there are many others that one can find.

So where is the gloom. For the attentive I can only see opportunity.

However I do hate the fact that many people will suffer greatly from the overall downturns.

 

[Nyden]

Depends on the outlook, "buy in gloom..." is an adage based on good sense, and there are many angles of course. My take:-

I was very happy to snap up Oxiana yeserday when in my view it was really oversold. Over night gold has firmed a bit and copper, in which there is a huge world shortage, went up 3.4% overnight also. With needs for electric motors in alternative energy and continued high tech developments in the exapansions of India and China, OXR has to be one of the very best on the ASX. I am sure there are many others that one can find.

So where is the gloom. For the attentive I can only see opportunity.

However I do hate the fact that many people will suffer greatly from the overall downturns.

Sure hope you're right there Explod, the downturn on the OX over the last few days has put a dent in my pocket. Well, my paper-pocket.


This 'crash / correction' just doesn't feel sharp enough to be a crash, it's too spread out. I don't know what exactly this is, but I don't believe it to be a crash.

 

[explod]

Sure hope you're right there Explod, the downturn on the OX over the last few days has put a dent in my pocket. Well, my paper-pocket.


This 'crash / correction' just doesn't feel sharp enough to be a crash, it's too spread out. I don't know what exactly this is, but I don't believe it to be a crash.

I missquoted copper, it rose by 1.74% overnight, it was nikel that went up 3.43%, had that in my head as it supports my following of JRV

 

[mfp]

A 100 point buy-back this afternoon and a 14% correction from Nov. top till now suggests we have hit the bottom. The smart investors get in at ground floor, many may have entered today

Problem is they pressed the basement button. Instead of getting the 200 point rally on the DOW that they expected, it tanked again.

 

[Scuba]

Being so inexperienced I wouldn't hazard a guess, but doesnt a 100 period SMA crossing down through a 200 period SMA on a one year chart (need to select one year) signify the need for a parachute or abseiling gear?

 

[M34N]

Problem is they pressed the basement button. Instead of getting the 200 point rally on the DOW that they expected, it tanked again.

Exactly, futures here now show -75, but to be fair, most falls should be limited to the banks/financials who did spectacularly well to recover on Friday, resource side should do better with Rio takeover rumours and higher commodities, and the general consensus they may have been oversold on Friday.

But with the market the way it is, I wouldn't rule out resources going down!

 

[Awesomandy]

Exactly, futures here now show -75, but to be fair, most falls should be limited to the banks/financials who did spectacularly well to recover on Friday, resource side should do better with Rio takeover rumours and higher commodities, and the general consensus they may have been oversold on Friday.

But with the market the way it is, I wouldn't rule out resources going down!

I think you are right. Although, a couple of days ago, I told my work mates that, if I could, I would go long on the resources, and short the financials as a hedging strategy. If I did that, I would've gone bankrupt on Thursday, and then bankrupt for the 2nd time yesterday.

 

[ithatheekret]

Personally I think in this market you have to trade in and out over a short term. Its too risky holding stocks over a long period of time. its fine saying they will recover but how long will it take and all the time it takes your money is tied up just waiting to return to levels where you break even. Better to cut your losses and get your cash working for you on another stock. I have changed my trading strategy completely over the last month. In and out over a short time..smaller profits but more of them...same mentality as the $2 shop

Oh yes I agree Cordelia , the ROE mention was directed at banks , but it has been decades since I last saw it mentioned anywhere , to see it as a username , sparked my funny bone off .

On the other hand I have been buying certain stocks at certain levels and they have kept the faith and stayed within an impressive range during the downturn . I mentiomed yesterday that at the end of the day we would see which blue chips are for real and not hiding behind a blue rinse .

I stand by that , and have put my money where my mouth is , so to speak , after all it's no use having an idea without acting on it . It all depends on your plan I suppose . Just don't let anything other than fact or logic interfere with your game plan .

 

[blablabla]

Is this a correction or a bear market or a crash?

Can't be a crash, because the Chinese economy hasn't shown any sign at all of shutting down.

Definitely a correction of some sort. Possibly the reason this correction is rolling differently from previous recent corrections is that the market has changed from bull to bear. In other words, this is a downwards correction at the start of a bear market.

Electronic trading has the potential to cause great volatility as traders react to news, sentiment and market movements. Add the potentially volatile ingredients of the new generation of online traders to the uncertainties of a bull/bear changeover correction and the result is uncharted waters.

Whatever the cause, Friday's market action was weird. The market tanked but the big banks soared. The only predictable thing in this market is unpredictability. Gotta agree with Cordelia, short term is the way to go.

 

[Real1ty]

Is this a correction or a bear market or a crash?

Can't be a crash, because the Chinese economy hasn't shown any sign at all of shutting down.

China is starting to gain control of its turbocharged economy, just as a U.S. slowdown raises the risks of doing so.

A narrowing trade surplus and declining money-supply growth are among the first signs that the world's fourth-largest economy is pulling back from its fastest expansion in 13 years. The government has raised interest rates six times in a year, restricted credit, frozen some prices and let the currency appreciate to damp growth and inflation.

The risk is that, with months of effort to cool off China finally taking hold when the U.S. is already flirting with recession, both main engines driving the global economy may power down at the same time.

``As foreign demand deteriorates, China may overdo its tightening of policy and cause a sharp economic slowdown,'' says Frank Gong, Hong Kong-based chief China economist at JPMorgan Chase & Co. ``If the central bank raised interest rates too much, it would damp domestic demand and increase the danger of economic downturn.''

China's trade surplus narrowed in December and money-supply growth dwindled, signaling that the fastest economic expansion in 13 years may have peaked.

The trade surplus shrank to $22.7 billion from $26.2 billion in November, the Chinese customs bureau said in Beijing today. M2, the broadest measure of money supply, rose 16.7 percent to 40.3 trillion yuan ($5.55 trillion) from a year earlier, the smallest increase in seven months, the central bank said.

Exports grew at the slowest pace in two years, indicating that recent yuan gains, the cooling global expansion and cuts to export-tax incentives on polluting industries are beginning to bite. The central bank is still likely to take more measures to limit credit, ease inflation from an 11-year high and prevent the economy from overheating just as the U.S. expansion is faltering.

``China's economic expansion may have peaked last year,'' said Wang Tao, an economist at Bank of America Corp. in Beijing. ``China needs to tighten monetary policy further, given that new loan growth may rebound.''

While China isn't going to shut down, as you call it, a slowing U.S is going to have an effect on it, which of course will have flow on effects.

Just how big it is going to be, well time will tell, but there are some early signs starting to appear.

Watch this space.....

 

[Mofra]

IF we hit XAO 5000 the dividend % payouts on stocks will be enormous, must entice some buying at that point.

Only if the assumption is made that dividend levels would be maintaned, which so far in the US reporting, it appears they aren't.

I think, if anything, people are starting to understand that in the shorter term sentiment is as important to shareprice as the fundamentals.