Imminent and severe market correction

[rub92me]

It would appear everything is rosey in the financial markets again.
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.

That's what baffled me as well. Bad earnings: great!, let's reward you with a solid rise in shareprice. Similar news from Deutsche Bank today and hardly a ripple. It's starting to look a bit like ostriches with their heads in the sand at the moment imo.

 

[Porper]

Not that I am bullish particularly, but this does seem to be the most probable count for the Dow.

Bad news is just getting ignored, will it last ? Nobody knows.

Certainly the easiest, simplist count without getting in to complex expanded flat patterns etc.

 

[rub92me]

Next to come is Merrill Lynch with over $4 billion written-off. They already sacked two executives. Get ready for another party on Wall Street!

 

[Sean K]

Next to come is Merrill Lynch with over $4 billion written-off. They already sacked two executives. Get ready for another party on Wall Street!

Where's that news rubme?

 

[dhukka]

Where's that news rubme?

Merrill will report mid-month. The news of substantial write-downs has been out for a while. I assume the $4 billion rubme is alluding to is the expected mark-to-market losses on some of its assets.

The story comes from a Goldman Sachs earnings revision which saw them cut Merrill's FY07 forecast by 26%. Should be an interesting report.

 

[jurn]

Where's that news rubme?

There's article in today's SMH
Merrill Lynch sacks two execs, prepares write-offs
http://www.smh.com.au/news/business/merrill-lynch-sacks-two-execs-prepares-writeoffs/2007/10/04/1191091276438.html

 

[Sean K]

Merrill will report mid-month. The news of substantial write-downs has been out for a while. I assume the $4 billion rubme is alluding to is the expected mark-to-market losses on some of its assets.

The story comes from a Goldman Sachs earnings revision which saw them cut Merrill's FY07 forecast by 26%. Should be an interesting report.

Thanks dhukka.

So, if they don't write down $4b their sp will probably shoot up?....

Seems to be the wave of the day at the moment.

Equities ignoring recession worries
October 03, 2007

WE are in the midst of the worst financial crisis since 1998. The American housing market is in its direst state - sales and prices are down, foreclosures and defaults are up - since they started keeping statistical records 50 years ago. The fear of a recession is so large that a reluctant Federal Reserve has reversed course and sharply cut interest rates.

The US dollar is falling to levels against major currencies not seen in decades. Oil is climbing to record highs. On Monday, Citigroup, one of the nation's biggest banks, said its profits for the three months to September would probably drop 60 per cent from a year earlier.

Could somebody please tell the stock market?

As you have pointed out with some stats though, history has shown the market to be irrational on the odd occasion....

 

[dhukka]

Thanks dhukka.

So, if they don't write down $4b their sp will probably shoot up?....

Seems to be the wave of the day at the moment.

Kennas,

Judging from Merrill's push into riskier asset markets and based on other brokers with similar exposures that have already taken write-downs, there is little doubt that MER will be marking down asset values. The actual amount is still unknown but expect it to be in the billions.

As you have pointed out with some stats though, history has shown the market to be irrational on the odd occasion....

Absolutely, As Keynes once said:

"The market can stay irrational longer than you can stay solvent"

if the mark-downs come in at $2 billion and not $4 billion the market may push MER stock higher but at the end of the day it's all short term noise. Of more importance is what is coming ahead.

 

[sassa]

Great numbers for the American investor and economy last night with the release of the payroll numbers.And for that matter,also the world markets.One thing puzzles me-the revision up from 4000 jobs down to 89,000 up for August.This is a mind boggling revision of 93,000 jobs-how can so many new job creations be missed?
The Dow hit record height at one stage but pulled back to be under all time highs.Maybe the investor isn't all that sure of these numbers.Was the increase due to psychological cause?
This IMMINENT and severe market correction is taking some time. Data being released monthly is against this. Many will still point to the housing crisis.
One analysts said that the numbers did not tell the state of the economy and the risk of recession is still just under 50-50.But then again,there are so many different analyses of conditions by "experts"that the whole matter is clouded to most.

 

[Uncle Festivus]

Great numbers for the American investor and economy last night with the release of the payroll numbers.And for that matter,also the world markets.One thing puzzles me-the revision up from 4000 jobs down to 89,000 up for August.This is a mind boggling revision of 93,000 jobs-how can so many new job creations be missed?
The Dow hit record height at one stage but pulled back to be under all time highs.Maybe the investor isn't all that sure of these numbers.Was the increase due to psychological cause?
This IMMINENT and severe market correction is taking some time. Data being released monthly is against this. Many will still point to the housing crisis.
One analysts said that the numbers did not tell the state of the economy and the risk of recession is still just under 50-50.But then again,there are so many different analyses of conditions by "experts"that the whole matter is clouded to most.

I would take most statistical data coming out of the US, especially employment & inflation data, with a pinch of salt.
This thread was started some months ago - the correction has already been & gone, & the fundamentals havn't changed, in fact only gotten worse. Maybe there should be a new thread - Imminent & severe market crash .

The US is already experiencing a number of sector recessions eg housing & auto's, while a number are flatlining at best.

Sales of new homes tumbled 8.3 percent in August to the lowest in more than seven years and house prices dropped the most in four decades, the Commerce Department in Washington said last week. Consumer confidence fell to the lowest in almost two years in September, according to the Conference Board's index of confidence.
``The big picture is you're going to have a consumer that is going to be pulling back significantly,'' Pimco's Kiesel said. ``The rate cuts by the Fed are unlikely to save housing.''

Keep in mind that the recent correction is possibly only the start of a larger move, as the wealth affect lessons and money velocity decreases through out the US economy reducing the last mainstay - consumer spending. The lower US dollar is making imports even more expensive.

The money shuffling firms on Wall St are just starting to expose what sort of icebergs they have just hit. This isn't over by a long shot.

While it makes us feel all warm & fuzzy to be soothed by the rhetoric from our financial masters, no matter how hard they try to gloss over the real factual data there is only one outcome from artificially prolonging the effects of the liquidity binge hangover from the easing in 2002. Bernanke may have given the world the financial equivalent of a Berroca, but the damage has been done and continues to be done globally. I'll be trading the data & the markets as it comes along, but I won't be buying any cheap tickets for a deckchair on the Titanic .

 

[sassa]

I would take most statistical data coming out of the US, especially employment & inflation data, with a pinch of salt.
This thread was started some months ago - the correction has already been & gone, & the fundamentals havn't changed, in fact only gotten worse. Maybe there should be a new thread - Imminent & severe market crash .

Why take the data with a pinch of salt?Are the figures cooked to lead the ordinary person to think things are not as bad as they really are?If they are cooked,surely the investment firms and traders know this and would not be participating in the markets.The volumes being traded show that the market is gaining more confidence each day.
I agree with a new thread with new direction to discuss the implications of the data now being divulged from the various Fed and financial bodies.

 

[Uncle Festivus]

Why take the data with a pinch of salt?Are the figures cooked to lead the ordinary person to think things are not as bad as they really are?

Maybe. Like you said in post 61, such large differences in data makes me question the validity of the data & the methods they use to collect, even though they make the proviso that the data is prone to statistical errors. Even so, money has been made & lost on basically something that perhaps didn't even happen eg the employment numbers didn't go negative after all, but after the data was released I recall there was a sizable sell-off.
No, I don't think they are telling us the whole story, but traders can still trade it.

 

[Porper]

This thread was started some months ago - the correction has already been & gone

I hardly think this little blip we have just had can be called a severe market correction.

Look at the real correction in 2000, then look at what we have just had, you can hardly see it on the chart it is that minor.

Not to say we won't get the big correction but we certainly haven't had one yet.

 

[Uncle Festivus]

I hardly think this little blip we have just had can be called a severe market correction.

Look at the real correction in 2000, then look at what we have just had, you can hardly see it on the chart it is that minor.

Not to say we won't get the big correction but we certainly haven't had one yet.

Yes, splitting hairs I guess as to being severe, but stil a technical correction? So will the real correction/crash please stand up - then again maybe it better not .

 

[Porper]

Yes, splitting hairs I guess as to being severe, but stil a technical correction? So will the real correction/crash please stand up - then again maybe it better not .

I wasn't having a go at you festivus, just pointing out that if we are going to have a "real" correction we are still waiting for it.

Just looking at a log chart of the Dow since 1947, quite interesting.Looking at the corrections since then, we don't look like we will get one for a few years yet, but who knows, the markets act in wierd ways, present Bull run no exception.US in serious trouble and we are surging to all time highs.

 

[wavepicker]

I hardly think this little blip we have just had can be called a severe market correction.

Look at the real correction in 2000, then look at what we have just had, you can hardly see it on the chart it is that minor.

Not to say we won't get the big correction but we certainly haven't had one yet.

200-2003 was full on bear market not a mere correction, wiping off almost 39% of the DJIA. Perhaps the term "a slow crash" would be more appropriate. At least it gave investors multiple opportunities to unload with all the deep retracements it had unlike 29 and 87 before going as low as it did.

 

[rub92me]

Kennas,

Judging from Merrill's push into riskier asset markets and based on other brokers with similar exposures that have already taken write-downs, there is little doubt that MER will be marking down asset values. The actual amount is still unknown but expect it to be in the billions.

if the mark-downs come in at $2 billion and not $4 billion the market may push MER stock higher but at the end of the day it's all short term noise. Of more importance is what is coming ahead.

Well the actual write downs were more like $5 billion, more than anyone expected. And guess what: the share price went up 2.5%. You gotta laugh...

 

[Porper]

200-2003 was full on bear market not a mere correction, wiping off almost 39% of the DJIA. Perhaps the term "a slow crash" would be more appropriate. At least it gave investors multiple opportunities to unload with all the deep retracements it had unlike 29 and 87 before going as low as it did.

I totally agree, 2000 was a bear market, not that I was around then but the chart says it all.

In Elliot Wave terms, it in my opinion was a correction to the last impulse higher, wherever you want to start that impulse it is irrelavant.

I suppose it depends on what time frame you are looking at, 29, 87 etc and we are looking at the largest time frame possible.To some people a couple of months ago could have been a severe market correction.I see it as a blip in a raging bull market.

 

[Awesomandy]

The Dow hit record height at one stage but pulled back to be under all time highs.Maybe the investor isn't all that sure of these numbers.Was the increase due to psychological cause?

I wouldn't worry about that one too much. It's most likely just some profit taking on a Friday afternoon.

To some people a couple of months ago could have been a severe market correction.

Given my limited experience, it's actually the biggest correction I've seen (ignoring the times when I wasn't interested in the markets).

I have recently heard a report too, that quite a few markets are actually cheaper than they were, in terms of the P/E ratio of the index. Can't recall where I've got that one from, but it's an interesting point, I guess.

Either way, the concerns over the health of America are definitely still with us - it looks like the credit bubble is getting rather large.

 

[dhukka]

Great numbers for the American investor and economy last night with the release of the payroll numbers.And for that matter,also the world markets.One thing puzzles me-the revision up from 4000 jobs down to 89,000 up for August.This is a mind boggling revision of 93,000 jobs-how can so many new job creations be missed?
The Dow hit record height at one stage but pulled back to be under all time highs.Maybe the investor isn't all that sure of these numbers.Was the increase due to psychological cause?
This IMMINENT and severe market correction is taking some time. Data being released monthly is against this. Many will still point to the housing crisis.
One analysts said that the numbers did not tell the state of the economy and the risk of recession is still just under 50-50.But then again,there are so many different analyses of conditions by "experts"that the whole matter is clouded to most.

Sassa,

Indeed the revision to August payrolls was welcomed by the market. It just shows how much statistical noise there is in the numbers and that you need to pay more attention to the revisions rather than the current month's data.

However I wouldn't say these are great numbers. If you consider that the increase in payrolls has averaged 97,000 per month over the past three months and that the US economy needs to add between 150,000 - 200,000 jobs per month just to keep up with new entrants into the labour force, then these numbers are not very good at all.

The unemployment rate rose 0.1% and it will continue to rise if the economy can only produce 100,000 new jobs a month and economics 101 tells us that rising unemployment is often a precursor to recession. That said, current employment numbers a long way from recessionary levels at the moment.