Imminent and severe market correction

[MS+Tradesim]

Missed the editing deadline on my last post but re: the Roubini interview I linked, he responds at the end to a throwaway question that Asia is not as weak as Europe. I'm looking to Asia to provide better clues to recovery than the majority who seem to be watching USA.

I'm thinking that China has seen how fragile its growth is and how systemically linked it currently is to US consumers and US dollars. It must occur to them that initiating internal growth directed policies is the only way to lessen their sensitivity to American ups and downs. It's clear that they do not want their businesses to be held to ransom by external resources companies. Their obvious focus on taking strategic stakes in miners shows their intent to manoeuvre beyond the current monopoly enjoyed by Rio, BHP and Vale.

I think their infrastructure focused stimulus spending will become internally reflexive.

 

[MR.]

This from Inside Business this morning. "CHINA"

http://www.abc.net.au/insidebusiness/content/2009/s2572780.htm

 

[MS+Tradesim]

That's an interesting read MR. In this interview at about 12:30 onwards Roubini remarks similarly.

http://www.bloomberg.com/avp/avp.ht...//media2.bloomberg.com/cache/vCUErdtS6D0w.asf

However, where I differ is in the psychology of it. Right or wrong, I think their expanding middle class will become more consumption oriented, but probably not to the extent of Americans. Anecdotally, my sister-in-law is Chinese and her family, immediate and extended, enjoy their shopping in Shanghai. I don't think it's going to take 10 or 20 years.

Here's another article along similar lines to the one you posted:
http://news.xinhuanet.com/english/2009-05/03/content_11305373.htm

Also, very intriguingly I see Soros is thinking along the same lines as myself. Not surprising though, given it's his theory underlining my own thinking about the big picture. Medium to long term, this is the direction I'll be making bets.
http://news.smh.com.au/breaking-news-business/worst-of-economic-crisis-over-soros-20090511-b0i3.html

 

[Uncle Festivus]

Just postering the possible market correction part 2 coming up? An amazing sequence of Doji and similar candles over the last 10 trading days on stuff all volume helps make the not too subtle market massaging by the likes of JP Morgan & Goldman Sachs oh so simple, all with the apparent blessing of the regulatory authorities ie the last half hour of trading is just getting too obvious for the long trade? Just send me the cheque and be done with it

And to think, only 15 more sleeps or so and then we finally get the much hoped/hyped second half recovery! It's almost unbearable having to wait for it to finally get here after all those annoying fundamentals keep getting in the way

Got to go and stock up on some more Glad Gamer supplies like red cordial, some caffein and some sort of dillusionary supplements to keep the dream alive!

 

[MRC & Co]

Yes, as of Monday, I am turning bearish again, this rally looks once again, ripe for a pullback. I thought the better than expected industrial production and retail sales from China may be enough to keep the hopes alive, but there was no follow through, a very negative sign.

Though, I don't think it will be correction part 2, doubt we will test the lows, but I will be looking for a 50% retracement or thereabouts.

 

[Muschu]

If we are ripe for a pullback, and I would think this rally can't go on at it's current pace for too much longer, then what are the thoughts on
- how low the All Ords and DOW will go? and
- whether such a pullback will be sustained?

Learner Rick who reads informed posters with interest.

 

[MRC & Co]

Hey Rick,

I would be looking for a 50% pullback from the high of this rally or perhaps slightly more, say around 7500 on the DOW chart above (given it would be the first pullback and subject to more panic selling). The only thing that worries me with this rally is the liquidity being pumped in and the cash still on the sidelines. A dip could potentially be bought heavily, so would have to watch volumes coming in and how price reacts.

Though I am not one for making longer-term predictions on exact price movements, just got to see how sentiment plays out and how much hope any new figures bring (engineered or not).

Firstly I want to see a pullback out of this range and below a false break level, perhaps below the 917 area on the S&P to confirm a decent retracement IMO.

I have shorts on the S&P at 950 FWIW.

 

[vincent191]

Is the cup half full or is it half empty? There will be a correction soon but is that an opportunity to buy or is it time to panic?

Personally, I have taken some profit especially in the resources sector, it has run hard and fast and in my opinion will have to stop to take a breather soon. I am kicking myself that perhaps I have sold too soon but I keep telling myself not to be silly and try to pick the very top. Somewhere near the top is good enough.

Again when the correction comes the challenge is to pick the bottom and buy back in. The next 3 months will be very interesting. Personally, I think the next 2 years will see the mother of all bull markets. Whether it will be V shape, U shape or W shape remains to be seen.

I think it will be W shape so hopefully I can catch the troughs and the peaks. It is all about timing and luck and a sprinkle of blessings from above.

 

[roysolder]

hi guys,
how do you think a pullback will effect gold prices and shares in mining companies.

 

[MRC & Co]

Vincent, I don't think we can see a mother of all bull markets for quite some time personally. Any drive out of China for a recovery, is BOUND to see asset inflation which could plunge the US into staglfation. Add in the US fundamental structure has to change (increase in domestic savings and cut in consumption once this QE process comes to an end), which will keep growth at very low levels (could see a similar fate to Japan over the last 20-30 years). So the global economy is in a very tough place over the next few years.

Roy, that is a very good question. Correlations are all over the shop at the moment, but I imagine a pullback in equities will hit mining shares, regardless of if commodites continue to rise.

I'm still bullish gold, but if we get a short-term bounce of both US Treasuries and USD, gold may see another pullback.

 

[Muschu]

Hey Rick,

I would be looking for a 50% pullback from the high of this rally or perhaps slightly more, say around 7500 on the DOW chart above (given it would be the first pullback and subject to more panic selling). The only thing that worries me with this rally is the liquidity being pumped in and the cash still on the sidelines. A dip could potentially be bought heavily, so would have to watch volumes coming in and how price reacts.

Though I am not one for making longer-term predictions on exact price movements, just got to see how sentiment plays out and how much hope any new figures bring (engineered or not).

Firstly I want to see a pullback out of this range and below a false break level, perhaps below the 917 area on the S&P to confirm a decent retracement IMO.

I have shorts on the S&P at 950 FWIW.

Now MRC

I've decided that you guys with the expertise set out to make life difficult for us L-platers. Especially when you don't all agree with one another....:

So an XAO of 3800 before even 4200? Or 3600 before 4400?

Time to phone a friend and ask if it's time to leave the rally and run to the bank account....

Wasn't retirement intended to be easier than this ---

 

[So_Cynical]

hi guys,
how do you think a pullback will effect gold prices and shares in mining companies.

Roy u know very well that the October 08 pull back saw all the mining stocks get
smashed...OGC under 20c per share etc, of course the commodity prices also
collapsed and had there low in and around October as well.

Its a little different at the moment.

 

[seasprite]

http://www.cnbc.com/id/15840232?video=1150850552&play=1 , depends how this pans out this week

 

[roysolder]

thanks MRC and so_cynical for your thoughts. just a waiting game and in for the long term

 

[Glen48]

Hope the bail outs kick in soon:
http://www.voxeu.org/index.php?q=node/3421&ref=patrick.net

 

[rainylake]

After the bailouts have their affect we still have to pay for them. Add to the cost of the bailouts all the other government gone wild spending on health care, cap and trade etc.... The US is so far in debt that it has to reduce our standard of living for many many years to come. Our grandchildren will still be paying for this mess.

 

[Uncle Festivus]

And you thought that was a correction! We have the left shoulder, a head and......?

 

[Garpal Gumnut]

And you thought that was a correction! We have the left shoulder, a head and......?

Agree totally uncle.

The funnymentalsits are in a Rudd/Obama made dead cat.

See my comments on the xao thread.

2400 is my prediction on ew analysis for the xao.

h and s is not surprising.

Thanks for the chart.

gg

 

[explod]

Hope the bail outs kick in soon:
http://www.voxeu.org/index.php?q=node/3421&ref=patrick.net

Looks like the're kicking in everywhere. Have a scan of Bloomberge every week or so, and all the lead articles say they are "out of the woods", the "end is in sight" "home sales probably rose"

Yee haaa, asx over 4000 this week. Time to party again.

 

[knocker]

And you thought that was a correction! We have the left shoulder, a head and......?

Nice looking graph. So what! does not mean one iota. Onward and upward comrades !!!!!!!!!!!!!!!!: