Imminent and severe market correction

[bean]

well all seems ok'ish so far tonite.....only just opened i know but seems to be positive...

Yes but it should be exploding away last night should have moved two not one % and tonight it is struggling (If it had moved with any force would have taken DOW back to 13700-13900 within a matter of days (3 day)
Red by midnight and its downhill all the way

 

[Wysiwyg]

The new housing sales and durable goods reports out tonight in the U.S.
A continued decline in new house sales is expected by the analysts and will prolly see a downer on the U.S. indices.

 

[Porper]

The new housing sales and durable goods reports out tonight in the U.S.
A continued decline in new house sales is expected by the analysts and will prolly see a downer on the U.S. indices.

The people that matter will already know the data, still, they might use it to manipulate prices.

Having said that the Dow is in overbought territory, so the next few days could be a consolidation or worse, down a fair bit.

 

[>Apocalypto<]

The people that matter will already know the data, still, they might use it to manipulate prices.

Having said that the Dow is in overbought territory, so the next few days could be a consolidation or worse, down a fair bit.

Hi Porper,

Good points, one thing on the dow that stuck out to me is the declining volume on this couter rally move. So I am think some more down side to come. From what I have read that is normal volume behavior in a counter rally.

this rally looks really wild on the xjo fair to vertical but I will look to buy in on a higher low. though my gut tells me its suicide!

 

[drmb]

Interesting article on finance.yahoo.com - Four Tips for Riding a Seesaw Market by Laura Rowley Posted on Thursday, August 23, 2007, 12:00AM

My neck hurts. According to the Mayo Clinic's web site, whiplash occurs "when the head is jerked forward and back, stretching the soft tissues of the neck beyond their limits." Lately, I find that an involuntary neck-snapping occurs every time I walk past a television, computer screen, or radio, and catch the latest stock market update.


This is typically followed by an ill-advised trip to the Internet to survey my investment accounts -- sagging like cheap hosiery bunched at the ankles. Who knew stocks and stockings could have so much in common? If this market doesn't give you whiplash, stop reading. But if a 300-point drop in the Dow evokes the sensation of digesting bad oysters, here are a few tips to ease your market-induced stress.


Be True to Your Goals
• Investing is about meeting life goals, so make sure your allocation reflects your aspirations.


I hate when people say that investing in the stock market is gambling. Money thrown on a blackjack table in Atlantic City can evaporate instantly (which, regrettably, I learned the hard way). But that's never happened with a reasonably diversified portfolio of stocks and bonds.

On the other hand, a diversified portfolio will swing in value, a natural reflection of the economic cycle. The investor's best defense is to develop a specific allocation strategy that's like Donald Trump's hairstyle -- highly individualistic and oblivious to passing fads.

"It's important to come up with an allocation to meet and achieve goals -- that's the biggest disconnect I see," says Michael Steiner, wealth manager with RegentAtlantic Capital in Chatham, N.J. "Clients will come in with a portfolio, and when I ask what the objective of the portfolio is, 99 percent say, 'To make money.' But what's the money for?"

Be Realistic

• Financial goals need to be concrete, precise and measurable -- with real timeframes and credible numbers.

For instance, Steiner says, "If you want to retire at 62 and live on a $70,000 after-tax [income], then the portfolio should be constructed to meet that goal."

Nobel laureate Harry Markowitz demonstrated that the bulk of investment returns come from allocation -- the mix of investments -- rather than the choices made in each category. It's kind of like nutrition: You'll get fat if you eat more ice cream than vegetables. It doesn't matter whether it's Ben & Jerry's Chunky Monkey or Edy's Cookie Dough.

"That's the most basic investment decision most people will make -- how much you have in cash, bonds, and stocks," says Charles Farrell, of Northstar Investment Advisors in Denver. "Then, within the bond and stock categories, check to ensure that you're adequately diversified. People debate the appropriate amounts, and there's no correct answer, but what generally makes sense is to have a broadly diversified and balanced account." (Novice investors, see my blog for allocation how-to's.)

By contrast, if you're in the market with vague hopes of getting rich, you'll likely abandon ship when stocks decline -- which everyone knows is the ideal time to get in. "It's been proven time and time again: When there's doom and gloom, it's usually the best time to buy," says Steiner. "Emotionally, it's the hardest decision to make, even though fundamentally it makes sense."

Be Patient

• Stocks are an excellent investment -- over time.

If you're unnerved by the latest market rout, it may be time to reconsider your risk tolerance. But first look at the timeframe of your investments.

"The more time you have -- for instance, until retirement -- the more you can tolerate the natural gyrations of the markets," says Michael Furois, president of The Planning Associates in Phoenix. Ariz. "When looking at your 401(k) or other investment account statements, you may have to remember this: The reduced value of your investments is only a temporary decline in price, not a permanent loss in value."

In its best year, the S&P 500 rose nearly 54 percent; in its worst year, it dropped about 43 percent, according to Ibbotson Research. Nobody knows what's going to happen in the future, but studies based on the past performance of the S&P 500 have found that since 1925, the chance of losing money over a year is 28 percent; over 5 years, 10 percent; over 10 years, 3 percent; and over 20 years, 0 percent.

"One good way to test your comfort level is to take a hypothetical market decline and apply it to the amount you have invested in the market," Farrell suggests. "For instance, if the market declines 20 percent, that will affect each one of us differently. If this is my first year as an investor and I have $5,000 in the market, my account might decline $1,000. Probably not a life-changing event. If I have $500,000 in the market and am age 50, I might see a decline of $100,000. Each investor has to honestly answer whether they're comfortable with that type of volatility."

From 2000 to 2002, investors experienced declines of 50 percent. Farrell points out: "Apply that number to the amount you have in equities and see how you feel. If you can stay committed during that type of cycle, and focus on the probability of long-term positive returns, then you're probably in the right place," he says. "If the potential decline in your account value concerns you, then you may be taking too much risk and it's probably time to consider some modifications."

In the meantime, also consider that from its low point in 2002, the Dow has risen about 6,000 points, or roughly 80 percent.

Be Introspective

• Market volatility can be a reminder to reassess risk and rebalance.

If the market roller coaster is keeping you up at night, don't get down on yourself. You probably couldn't have predicted you would feel this way. People make predictive errors for a variety of reasons, but one that's perhaps most germane here is something called "the hot/cold empathy gap." When people are in a "cold" or neutral emotional state, they often have trouble imagining how they would feel or what they would do if they were in a "hot" state -- angry, hungry, in pain, or, say, watching their E*Trade account plummet in value.


On the other hand, when we're experiencing a hot state, we have difficulty imagining that we'll cool off at some point (which is why, in the heat of the moment, it seems perfectly reasonable to sell all the stocks in your E*Trade portfolio and put the money under your mattress).


Meanwhile, studies on loss aversion have found investors tend to feel the pain of losses more than the joy of gains. "Investors generally make mistakes when they're reacting out of either fear or greed," says Farrell. "Having a balanced and diversified account generally helps combat the tendency to be driven by those two very powerful emotions."

Once you design an allocation strategy, rebalance it at least once a year to reflect the original mix. "Maybe you let those winners ride a little too long and weren't diligent about maintaining your allocation," says Steiner. "Maybe your 60-40 stock-to-bond ratios went to 50-50, and you felt too overconfident."

Get Help
If you're not sure how much risk to take, or whether your investments accurately reflect your life goals or appropriate timeframes, get some help. Many 401(k) providers have investment professionals available to talk to participants about their allocations. Or consider talking with a fee-only financial planner.

 

[INORE]

nice article...

again i think fridays DJIA close will be another fairly ho-hum affair...which in turn should make for a nice start to ASX on monday to make-up for todays close...

 

[drmb]

nice article... again i think fridays DJIA close will be another fairly ho-hum affair...which in turn should make for a nice start to ASX on monday to make-up for todays close...

Take another look!

Symbol Last Change
Dow 13,378.87 142.99 (1.08%)
Nasdaq 2,576.69 34.99 (1.38%)
S&P 500 1,479.37 16.87 (1.15%)
10-Yr Bond 4.6330% 0.0150
NYSE Volume 2,522,251,000
Nasdaq Volume 1,663,246,000

DJI:^DJI
Index Value: 13,378.87
Trade Time: 4:04PM ET
Change: 142.99 (1.08%)
Prev Close: 13,235.88
Open: 13,231.78
Day's Range: 13,208.65 - 13,381.47
52wk Range: 11,273.90 - 14,121.00

 

[sassa]

Take another look!

Symbol Last Change
Dow 13,378.87 142.99 (1.08%)
Nasdaq 2,576.69 34.99 (1.38%)
S&P 500 1,479.37 16.87 (1.15%)
10-Yr Bond 4.6330% 0.0150
NYSE Volume 2,522,251,000
Nasdaq Volume 1,663,246,000

DJI:^DJI
Index Value: 13,378.87
Trade Time: 4:04PM ET
Change: 142.99 (1.08%)
Prev Close: 13,235.88
Open: 13,231.78
Day's Range: 13,208.65 - 13,381.47
52wk Range: 11,273.90 - 14,121.00

I'm confused.What are you trying to tell Inore?

 

[drmb]

I'm confused.What are you trying to tell Inore?

May have been ho hum at 1130 am but all US SX closed high at end of trade -
"Bulls Mad Dash Ends Week on Wall St. AP - Wall Street ended its calmest week in a month with a big advance Friday, rising on solid economic readings that countered the bleak sentiment that has blanketed the financial markets."

That's not ho hum to me!!

 

[Rob_ee]

May have been ho hum at 1130 am but all US SX closed high at end of trade -
"Bulls Mad Dash Ends Week on Wall St. AP - Wall Street ended its calmest week in a month with a big advance Friday, rising on solid economic readings that countered the bleak sentiment that has blanketed the financial markets."

That's not ho hum to me!!

In other words it's a guessing game.

Either the sub prime thing doesn't matter or it will come home to roost sooner or later.

Since I have no idea when/if that may happen I am quite happy to sit out of the market at the moment ,and yes I have missed large possible gains recently.

I think i read somewhere that the ASX has made the largest % gains in decades during the past 2 weeks ???

Go figure ?, there are more important things than money , spring is in the air
and my garden beckons.

I am a wuss
Rob

 

[sassa]

In other words it's a guessing game.

Either the sub prime thing doesn't matter or it will come home to roost sooner or later.

Since I have no idea when/if that may happen I am quite happy to sit out of the market at the moment ,and yes I have missed large possible gains recently.

I think i read somewhere that the ASX has made the largest % gains in decades during the past 2 weeks ???

Go figure ?, there are more important things than money , spring is in the air
and my garden beckons.

I am a wuss
Rob

A guessing game-sort of.Investors look for any any positive signs to buy in but do they really dissect the information given.Take for example the Dow yesterday which started off very cautiously because of the credit squeeze and then -bingo-the numbers for the housing market came in above all expectations.Was the fact that they were for the June15-July15 period(which is historically a strong month in America) really analysed and the fact that cancellations are not included in the data?This data is notorious for the number of revisions it goes through and as Paul Kasriel of Northern Trust said,"I would take the numbers with a grain of salt."
The real effect of the slowdown in the housing sector will be seen in the August and September figures as people now have to have 20% down and even then you will be subject to credit reviews.This spillover into the real economy will create a drag on growth(enough to be a recession?) and a bearish effect? on the market.

 

[Rob_ee]

A guessing game-sort of.Investors look for any any positive signs to buy in but do they really dissect the information given.Take for example the Dow yesterday which started off very cautiously because of the credit squeeze and then -bingo-the numbers for the housing market came in above all expectations.Was the fact that they were for the June15-July15 period(which is historically a strong month in America) really analysed and the fact that cancellations are not included in the data?This data is notorious for the number of revisions it goes through and as Paul Kasriel of Northern Trust said,"I would take the numbers with a grain of salt."
The real effect of the slowdown in the housing sector will be seen in the August and September figures as people now have to have 20% down and even then you will be subject to credit reviews.This spillover into the real economy will create a drag on growth(enough to be a recession?) and a bearish effect? on the market.

And of course a lot of the euphoria is based on the premise that the other type of rate cut will be made in September OR sooner.
Now that all is well and the clouds have lifted just maybe there will be no cut after all ?

Wonder what that will do to the market. ?

The reason why I am presently being a wuss is that my trading exploration in MS is not coming up with anything at all in the past 2 weeks.
Since I have done reasonably well so far (bless AXM) there is no reason to change

 

[INORE]

May have been ho hum at 1130 am but all US SX closed high at end of trade -
"Bulls Mad Dash Ends Week on Wall St. AP - Wall Street ended its calmest week in a month with a big advance Friday, rising on solid economic readings that countered the bleak sentiment that has blanketed the financial markets."

That's not ho hum to me!!

Yes i agree that wasnt a ho-hum finish...perhaps this cats made of rubber....

I tend to agree that the US rates wont be cut if everything starts to resume an upward pattern, BUT if there was some more large scale drops you would expect them to use it and hence if we get another drop before they cut rates, that would create a good BUY opportunity....and with this assumption some people may not be buying back as much and waiting for the next pull back and recovery cycle.....and the rubber cut continues to bounce but perhaps a little less high each time....

 

[zt3000]

Anyone else of the view that when the govt tells the people to stay calm, and everything is ok ... things in fact are usually really really bad ....??

 

[GreatPig]

Remember: be alert, not alarmed

GP

 

[sassa]

Remember: be alert, not alarmed

GP

Come Saturday,our time,when Bernanke addresses the whole world financial market,all players will be alert and could be very alarmed.Figures to be revealed this week in the U.S.about housing sales and consumer spending will have a bearing on whether he will intimate that there will be a cut to the Fed rate.If the figures,as expected,are down,will he be game enough to cut the Fed rate?What nasties lurk in his own system and those of the world if he does intimate that there will be a cut?

 

[sassa]

Come Saturday,our time,when Bernanke addresses the whole world financial market,all players will be alert and could be very alarmed.Figures to be revealed this week in the U.S.about housing sales and consumer spending will have a bearing on whether he will intimate that there will be a cut to the Fed rate.If the figures,as expected,are down,will he be game enough to cut the Fed rate?What nasties lurk in his own system and those of the world if he does intimate that there will be a cut?

Interesing article by Caroline Baum at Bloomberg titled "Bernanke Opts For Tough Love & Targeted Cure."
In the article Baum says-"He proved himself to be cool under pressure and measured in his response,addressing the immediate need for liquidity by providing more of it-on demand."
Further,"We were all conditioned to expect Greenspan's type of parenting,giving the child what it wants even if,in the long run,the treatment does more harm than good."
"The Bernanke Fed is working hard to disabuse(free from a mistaken idea) investors of the notion that market turmoil translates into an immediate rate cut......capitalism without financial failure is not capitalism at all,but a kind of socialism for the rich."
Finally,"....bubbles don't end well.At some point there is no greater fool to take the overpriced asset off the last buyer's hands.The jig is up.Prices collapse.The real estate bubble has an added feature.The bad loans aren't just a matter between borrower and lender.The loans have been packaged,pureed and processed as complex credit derivatives,marketed and sold with a good dose of leverage.The ultimate effect of all this financial engineering gone awry is,as they say in the mortage-backed securities market-TBA."

 

[INORE]

i didnt like the look of this, this morning...looks like a loss of confidence increasing throughout the day....back to cash for this once bitten trader.

 

[wayneL]

"The Bernanke Fed is working hard to disabuse(free from a mistaken idea) investors of the notion that market turmoil translates into an immediate rate cut......capitalism without financial failure is not capitalism at all,but a kind of socialism for the rich."

Quite a few commentators are coming out with similar statements; fair comment too.

Wall Street et al must be allowed to weather the consequences of its binge. It might mean a deeper recession, but ultimately it will be much healthier for western economies.

 

[sassa]

i didnt like the look of this, this morning...looks like a loss of confidence increasing throughout the day....back to cash for this once bitten trader.

View attachment 12698

Looks like the good old U.S.of A markets might open on a positive.The S & P 500 futures is up and also the Nasdaq at 5a.m.(NY time).European markets are responding positively after a shaky start but all could........