Imminent and severe market correction

nioka said:

While we are not sheltered from the fallout in the USA we are DIFFERENT.

We have a government with a surplus of funds. We have a compulsory super scheme which is feeding a heap of cash into the market. We have a resource boom, the like of which has not been experienced before. Our natural gas and coal seam gas offsets the oil price on an international basis.

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Yes we are different from the US. If commodities are in a bubble that bursts then we are in more trouble than them.

Great Depression in Australia

"The Great Depression of the 1930s was an economic catastrophe that severely affected most nations of the world, and Australia was not immune. In fact, Australia, with its extreme dependence on exports, particularly primary products such as wool and wheat, is thought to have been one of the hardest-hit countries in the Western world along with Canada and Germany."
source: http://en.wikipedia.org/wiki/Great_Depression_in_Australia

Good one Nioka. I would agree with all that.

I think he has you trumped Uncle.

I don't dissagree with your data and concerns, but concentrating on the short term I still stand by my earlier (classic) "the residue will carry over for another day".

But that doesn't mean the markets will go to a lower low, just that the longer term up trend will be more tempered than it has in the previus 5 yrs.

I also agree with someone elses's quote somewhere today that the last meeting of the G7 came up with a plan to stabalise the world economy, which I still think involves supporting the USD. I'm banking on it.

CamKawa said:

Yes we are different from the US. If commodities are in a bubble that bursts then we are in more trouble than them.

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Theoritically yes, CamKawa... but realistically, I don't believe commodies are in a bubble. I just don't see the demand for commodities crashing. A good part of that case is that I think China and India, among others, will increase domestic consumption at a faster rate than exports.

Whiskers said:

Theoritically yes, CamKawa... but realistically, I don't believe commodies are in a bubble. I just don't see the demand for commodities crashing. A good part of that case is that I think China and India, among others, will increase domestic consumption at a faster rate than exports.

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The problem I have with the China will save us theory is that if you look at the CSI 300 I'm not sure that Chinese believe they can save themselves.
http://www.bloomberg.com/apps/quote?ticker=SHSZ300:IND

Anyone with thoughts on what stock or stock types are less vulnerable to this imminent market correction?

woltage said:

Anyone with thoughts on what stock or stock types are less vulnerable to this imminent market correction?

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I do not make recommendations. But for me in shares I would have LGL, RSG, SBM, IGR and AVO, there are a lot of other good ones. As Aussie companies they have little sovereigh risk (eccept LGL) and no hedging. But I have very few shares, money is tied up in physical gold which protects it from the big problems yet to hit. A good conservative stock has got to be WOW who have a monopoly on our stomachs, (almost).

Spend a couple of weeks on a full read of the gold thread, "The Gold Price Where Is It Heading"

woltage said:

Anyone with thoughts on what stock or stock types are less vulnerable to this imminent market correction?

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Cash. Shop around for a good term deposit.

Whiskers said:

Good one Nioka. I would agree with all that.

I think he has you trumped Uncle.

I don't dissagree with your data and concerns, but concentrating on the short term I still stand by my earlier (classic) "the residue will carry over for another day".

But that doesn't mean the markets will go to a lower low, just that the longer term up trend will be more tempered than it has in the previus 5 yrs.

I also agree with someone elses's quote somewhere today that the last meeting of the G7 came up with a plan to stabalise the world economy, which I still think involves supporting the USD. I'm banking on it.



Theoritically yes, CamKawa... but realistically, I don't believe commodies are in a bubble. I just don't see the demand for commodities crashing. A good part of that case is that I think China and India, among others, will increase domestic consumption at a faster rate than exports.

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I guess time will tell?

Chindia is suffering a bad case of inflation-itis at the moment. I wonder what will happen when the current cost increases for raw materials e.g. iron ore, oil & coal (of approx 70%?) starts to show up in the supply chain globally?

May 16 (Bloomberg) -- India's inflation rate unexpectedly rose to the highest in 3 1/2 years, adding pressure on the central bank to raise borrowing costs further to tame prices.
Wholesale prices gained 7.83 percent in the week ended May 3 from a year earlier, after climbing 7.61 percent in the previous week, the government said in a statement in New Delhi.

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Unexpectedly! If your cost of raw materials is going up it's gotta come out the other end sometime, reducing either profits or consumption or standard of living eg food riots and higher interest rates eg Australia.
Chindia can't export it (inflation) any more so it may have to be contained locally which will severely reduce consumption. Not to mention their other minor problems .

The G7 better start pumping, priming, promoting the USD if they are to get any more traction as it seems to have stalled the last 2 weeks. Gold up $40 in 2 days.

Uncle Festivus said:

The Californian city of Vallejo, population 117,000, has filed for bankruptcy. A city has never filed for bankruptcy before in the US. Vallejo's tax income has been shattered by a 26% fall in house prices. There are other cities on the brink in California. They're lining up to file.

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Hey Uncle,
Now there is an oppurtunity for MacBank.
Buy up bankrupt local councils in the US.
Brilliant, yet another public utility monoply investment to bleed funds out of the masses.
I bet they are already working on it.

US Consumer Sentiment Posts Lowest reading since 1980.

"The Michigan Sentiment number and the SP 500 generally are correlated. There is a significant divergence here that will be resolved with either the SP 500 taking a dive within the next 30 days, or Consumer Sentiment doing a quick rebound starting with the next revision of the May 2008 number.
Change is in the air."
http://www.jessescrossroadscafe.blogspot.com/

"I have over the years discussed what a poor economic recovery this cycle has been in terms of job creation. Given the lack of robust job creation, its not a huge surprise that layoffs typical of most recessions have yet to appear.

Merrill Lynch's David Rosenberg notes it has become "economic myth" that the April employment report was benign. In particular, he notes that hours worked, one of the employment metrics reported by the BLS, is rapidly declining. In the April NFP release, hours worked plunged:

"Companies did not cut as many positions as expected, they cut the hours instead. The average work week plunged 0.3% (and, aggregate hours worked were down at an annual rate of 1% in the past three months), which, by the way, would be the equivalent of 400,000 job cuts.

This is a sign that labor market conditions and domestic demand are far softer than the headline suggests. What drives consumer spending inevitably is income growth. Average weekly earnings fell 0.2% sequentially in April in what was the largest decline in two years. This dragged the year-on-year rate down to 3.1% from 3.3% in March, 3.7% in February and the nearby peak of 3.8% posted last November in what is clear disinflationary trend in wages.

The rebound in the Household survey was all in part-time employment. While there was a nice rebound in the Household Survey, it was all in part-time employment – that is not the driver of confidence and spending. Growth in full-time jobs is what drives those things. And, full-time employment actually fell 375,000 in April and is down 572,000 year-to-date; of the folks who were working part-time in April, the number doing so because of “economic reasons” (mostly slack business conditions) surged 306,000 or 6.3% – again the steepest runup in two years. The diffusion indices fell through the floor to 45.4 in April from 48 in March – this measures the share of industries adding to payrolls and shows that even though the headline job loss was lower than expected, the decline was very broadly based across sectors. (emphasis added)
In case you missed the underlined text, employers cut back so many hours that it was the functional "equivalent of 400,000 job cuts."

This is not the sort of data you associate with economic recoveries."
http://bigpicture.typepad.com/comments/economy/index.html

I think we'll find that now as China has undergone devastating earthquakes and tremors , the supply demand ratio has been lifted a few notches .

The next year through to 2009 will be the next wave of need to rebuild many parts of its infrastructure , to be in time for the Olympics .

This may come as a surprise to the bears and I have had a strong bearish stance for a while, but I think we are going to see a bull market start within the next couple of months... However, I do first believe that a correction sometime this or next month will come first and then it would be a good time to load up..... bull market - we test the old highs and go slightly higher

FWIW, I have seen this set up numerous times before. The Yen/Dow is as perfect a negative correlation as you could get, and it currently shows a possible turning point for both, indicating a breather for the DOW & equities in general. It may be a tad early but getting close? The Dow just can't seem to stay above 13k?

Uncle Festivus said:

FWIW, I have seen this set up numerous times before. The Yen/Dow is as perfect a negative correlation as you could get, and it currently shows a possible turning point for both, indicating a breather for the DOW & equities in general. It may be a tad early but getting close? The Dow just can't seem to stay above 13k?

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The Dow is at a tough resistance of 200MA... first touch too... so correction is looking very likely... but come end of summer in the US, i think a bull run will start... have some great evidence i have seen

ShareIt said:

This may come as a surprise to the bears and I have had a strong bearish stance for a while, but I think we are going to see a bull market start within the next couple of months... However, I do first believe that a correction sometime this or next month will come first and then it would be a good time to load up..... bull market - we test the old highs and go slightly higher

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I'm a bear and not surprised in the least. I never ceased to be amazed at the unsubstantiated claims though. How about backing up your assertion with some reasons.

explod said:

I'm a bear and not surprised in the least. I never ceased to be amazed at the unsubstantiated claims though. How about backing up your assertion with some reasons.

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because that would be giving away my trade secret.... but time will tell, nothing is ever 100%.... but through my analysis, there is a strong probability of another bull run soon (July - Aug about)...

ShareIt, didn't you say in the Woodside thread that you took out a short? And that you think BHP has reached top?

juw177 said:

ShareIt, didn't you say in the Woodside thread that you took out a short? And that you think BHP has reached top?

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yes, I took a short today on WPL.... I said with BHP that it still has a possible leg up past the $50 mark (very likely actually) and then is due for a correction (but I haven't taken a short on it at this time).... if you look at a few posts back on this thread, I said that a correction will come in first and then we should get a bull run...

As a trader, I look to make $ on both sides... so yes, i will trade a correction and then load up for a bull run... but nothing is ever 100% and as we get closer to July, I will have a better idea if it will happen...

sorry juw177, BHP looks more likely to correct this week...

ShareIt said:

because that would be giving away my trade secret.... but time will tell, nothing is ever 100%.... but through my analysis, there is a strong probability of another bull run soon (July - Aug about)...

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Well we dont' want to spoil your secret but assertions if made need to be backed up by some evidence. If you cant' back it up dont post it, simple.

I think gold is going to go through the roof, if I could not back it up with reasoning (and I can and do) I would be stopped in my tracks by the moderators.

And probability, a little less certain than earlier in the day, going a bit weak at the knees perhaps ?