Imminent and severe market correction

[wayneL]

Totally agree Wayne, but some people seem obsessed either bullish or bearish, doesn't really matter.I am sure we have all at some point leant to far one way, I know I have, don't mind admitting it, I've lost plenty trying to short the market but really the recent bull run has been unstoppable.As we all know markets often react very differently to how we expect.

Sure the US is in trouble down the line, but the markets aren't confirming this with negative price action, infact quite the opposite.

All I am saying is look at what is happening now -, even with all the perceived problems.

Yep agree.

But looking at "why" the market is bullish, viz, the ridiculous .5% cut by Uncle Ben, and then "why" Uncle Ben cut .5%, could give a clue as to the future.

 

[sassa]

Sure the US is in trouble down the line, but the markets aren't confirming this with negative price action, infact quite the opposite.

The main reason the market is being so positive as Wallstreeters,economists and analysts are putting it is because,"the Fed is here to help."
The release of reports in America today will have an impact on the markets and this one
http://money.cnn.com/2007/09/25/news/companies/lennar/index.htm
will have a major bearing.

 

[greggy]

sorry to be a wet blanket but we need to also look at what is really happening.

BHP and the miners are such a major part of the market right now.

Take away that report in BHP and would we have rallied in the last two days like we have? again look at the report it's self, is it complete fact? It's speculation.

Since BHP then RIO really started to fire, i noticed the buyers moved into those two and then the rest of the market very quickly it's only takes a couple brave ducks to cross the road to convince the rest its safe to cross.

I am not doubting the move but you need to look at what it's made up of yes we are at recored highs but there are other factors that suggest this is playing to a script.

Interesting times.

Good Trading.

I feel that 7,000 this year is not out of the question (I made this prediction when the market was trading in the mid 5,000 range earlier in the year). Resource stocks especially are still largely trading on reasonable multiples. Our economy is still strong. Interest rates are still relatively low along with low inflation and unemployment. Market sentiment has turned remarkably positive in recent weeks. This bull market is not over by any means.
DYOR

 

[professor_frink]

I feel that 7,000 this year is not out of the question (I made this prediction when the market was trading in the mid 5,000 range earlier in the year). Resource stocks especially are still largely trading on reasonable multiples. Our economy is still strong. Interest rates are still relatively low along with low inflation and unemployment. Market sentiment has turned remarkably positive in recent weeks. This bull market is not over by any means.
DYOR

At the rate we're going greggy, we'll hit 7000 by the end of next week

 

[theasxgorilla]

But looking at "why" the market is bullish, viz, the ridiculous .5% cut by Uncle Ben, and then "why" Uncle Ben cut .5%, could give a clue as to the future.

I wonder how many people are taking it a step further and offsetting the gains on Wall Street against falls in the USD. If you destroy a currency by aggressively dropping rates in an economy that is experiencing inflation and the stock market rallies it only looks good on the chart...but under the surface.

 

[airjordan]

has anyone been been keeping an eye on the hang seng. i think there bubble is gonna burst any day now which will obviously send shockwaves through our market. checkout the attachment below. macd is the highest it has ever been, index gapped up today and the uptrend is way to steep to hold in my opinion. i'm happy being on the sidelines for a few weeks. any comments welcome.

 

[theasxgorilla]

index gapped up today

Wow, would you look at that gap! Given the steepness of the rally you'd have to be betting on that getting filled wouldn't you??

 

[wayneL]

I wonder how many people are taking it a step further and normalising the gains on Wall Street against falls in the USD. If you destroy a currency by aggressively dropping rates in an economy that is experiencing inflation and the stock market rallies it only looks good on the chart...but under the surface.

That's been a consistent argument for some of the bears like Peter Schiff. From an international currency perspective that's true. But I only partially subscribe to that. If that were a big factor, those markets whose currencies are strong would be stagnant. This is just not the case.

People are buying stocks and there's no way to get around that.

Whether or not these recent purchases turn out to be wise ones (for buy and holders) remains to be seen.

The credit crunch, which is widely believed by the masses to have been ameliorated, has a long way to run, according to folk whose opinion I respect.

Understanding how money is created, a continuing and worsening credit crunch will be devastating, but of course CB's are at work trying to stave that possibility off. (which ultimately can only be temporary, given the level of malinvestment)

The question is "when?" and how far can SMs run until that point.

There are huge cracks in the underlying world economy, but the SM marches on.

It beats the s#!t out of me.

 

[Shane Baker]

I wonder how many people are taking it a step further and offsetting the gains on Wall Street against falls in the USD. If you destroy a currency by aggressively dropping rates in an economy that is experiencing inflation and the stock market rallies it only looks good on the chart...but under the surface.

DJIA v USD index and DJIA v AUDUSD

Cheers


Shane

 

[Trembling Hand]

has anyone been been keeping an eye on the hang seng. i think there bubble is gonna burst any day now which will obviously send shockwaves through our market. checkout the attachment below. macd is the highest it has ever been, index gapped up today and the uptrend is way to steep to hold in my opinion. i'm happy being on the sidelines for a few weeks. any comments welcome.

It is getting a bit toppy but its not a sure bet. This index has only 38 or so stocks in it and some are flying, like some in our market (BHP etc) A correction is always posible but a complete meltdown or bursting of the bubble............... I wouldn't put any of my money on it yet.

 

[hacheln_mice]

DJIA v USD index and DJIA v AUDUSD

Cheers


Shane

Nice and informative post. It would certainly be interesting to see if the broader S&P500 Index can post an all time high after being adjusted for dollar depreciation in the coming weeks.

 

[Flying Fish]

It is getting a bit toppy but its not a sure bet. This index has only 38 or so stocks in it and some are flying, like some in our market (BHP etc) A correction is always posible but a complete meltdown or bursting of the bubble............... I wouldn't put any of my money on it yet.

I reckon the whole scenario looks bearish. All these gains have been on light volumn, just delaying tactics, .. I won't look at shares for a while.

 

[Trembling Hand]

I reckon the whole scenario looks bearish. All these gains have been on light volumn, just delaying tactics, .. I won't look at shares for a while.

Light volume?? which market are you talking about?

 

[dhukka]

I wonder how many people are taking it a step further and offsetting the gains on Wall Street against falls in the USD. If you destroy a currency by aggressively dropping rates in an economy that is experiencing inflation and the stock market rallies it only looks good on the chart...but under the surface.

The chart below is courtesy of Sitka Pacific Capital Management showing the rise in the S&P in gold and Euros. The chart is a few days old but you can see in Euro terms the S&P still has a way to go to get back to recent highs.

 

[theasxgorilla]

That's been a consistent argument for some of the bears like Peter Schiff. From an international currency perspective that's true. But I only partially subscribe to that. If that were a big factor, those markets whose currencies are strong would be stagnant. This is just not the case.

This is admittedly a VERY one dimensional and shallow counter argument...but, we've all seen the correlation of world equity markets through various 'panicy' corrections these last couple of years, right? What if everyone is just looking at the S&P500 as it's presented, in absolute terms, and saying, well...if the American's think they can keep it up than I suppose there is nothing to really worry about to the downside, the risk is to the upside...they're expanding and if we don't do likewise then we're missing out!

I know as an argument it lacks any sophistication as far as economic analysis is concerned...but when I see Schiff stuck on mainstream shows 3 against 1 (bulls v Schiff) and the obvious lack of sophistication shown but so many of the bull-side arguments I can only think that a lot of the rest of the world is thinking the same thing...see no evil, hear no evil, speak no evil...and besides, China is keeping us all really busy and my pension fund is still going up...who's up for golf this weekend?

 

[sassa]

The credit crunch, which is widely believed by the masses to have been ameliorated, has a long way to run, according to folk whose opinion I respect.

If you are a bear you'll love reading this article from Bloombergs today.
If you are a bull,you won't want to,but I know you will because you will repudiate what has been said.
http://www.bloomberg.com/apps/news?pid=20601087&sid=ad4W7q15.lds&refer=home

 

[greenfs]

My broker returned from a luncheon presentation in melbourne today made by Challenger Group. The presentation involved the consequences of the shift away from the US economy. It was indicated that whereas historically US GDP accounted for 35% of World GDP, that value has slipped now to 23%. Therefore, any problems arising in USA will have less of a REAL impact on the world economy these days.

In addition, the presentation focussed on the fact that profit reportings are continuing at 18% increase as with earlier years and therefore the current market momentum can be sustained.

A word of warning though. There will be stocks that continue to fall off the rails in the future just like SIP and CDR have in recent times. So, we all need to proactively manage our portfolios to ensure that the bad eggs are eradicated early. Maybe we should start a thread entitled "Possible Bad Eggs" and award a prize to the stock picker on a quarterly basis?

 

[bean]

It would appear everything is rosey in the financial markets again.
Thats why tonight POG and it would appear other commodities are going to be hit.
Well POG is up only when things are bad?
Everthing is fine
Palm Swings to First-Quarter Loss
EBay Takes $1.4 Billion Charge
• Citi's Bad News Looks Good To Investors (only US2.7B loss so far)
And earning season has just started
but a party the DOW is 14000.

ASX new high
(stock tipping for October only two days old but only 40% in green)

Its a Bull

 

[explod]

It would appear everything is rosey in the financial markets again.
Thats why tonight POG and it would appear other commodities are going to be hit.
Well POG is up only when things are bad?
Everthing is fine
Palm Swings to First-Quarter Loss
EBay Takes $1.4 Billion Charge
• Citi's Bad News Looks Good To Investors (only US2.7B loss so far)
And earning season has just started
but a party the DOW is 14000.

ASX new high
(stock tipping for October only two days old but only 40% in green)

Its a Bull

Problem with people like you and I Bean is that we are regarded as pessimists because we are optimists in regards to the gold price going up and we are also optimistic about the US dollar going down (in the long term of course and with major corrections. And I add this so that we can be seen as clearly in step)

The next problem we have is that we not only believe in this raging rising gold/ inverse dollar thingo of a bull, BUT,,, we grab it so hard by the horns that we get thrown all over the place. It then becomes hard to distiguish between the optimist and pessimist.

Now that is a bit gloomy. Maybe the secret is the spoon bender who can do things like that by just thinking about it. Could this be why the Dow keeps going up when we think it should go down. Wall Street have cottoned on to this spoon bender technique, thats it.

We live in interesting times.

 

[Flying Fish]

If you are a bear you'll love reading this article from Bloombergs today.
If you are a bull,you won't want to,but I know you will because you will repudiate what has been said.
http://www.bloomberg.com/apps/news?pid=20601087&sid=ad4W7q15.lds&refer=home

Weird hey. My citbank credit card people sent out a letter offering to bump up mycredit limit by 3250$. I can now have 9500$ on it !!!! Still lots of free money out there by the sounds of it ........