Imminent and severe market correction

[Wysiwyg]

O.k, being a rookie doesn`t allow for much experience but regardless here is another snapshot of what is unfolding on the hang seng(and also not to be ignorant of the pesso`s).Steep or what?First the beginning of October and then now.

p.s. not trying to spook anyone

 

[Uncle Festivus]

O.k, being a rookie doesn`t allow for much experience but regardless here is another snapshot of what is unfolding on the hang seng(and also not to be ignorant of the pesso`s).Steep or what?First the beginning of October and then now.

p.s. not trying to spook anyone

Pick a chart, any chart, shows pretty much the same thing. All waiting/expecting on the next rate cut from the US FED.

The case for a cut is compelling enough based on the deteriorating housing market. The telling thing will be whether it will be 25 or 50 bp's. If it's another 50 bp's then the Fed knows they are already in deep trouble, trying to counter the biggest housing bust in history so far; these things don't resolve themselves in months even, this will take years.

Perversely, the market will rally to new highs, blow-off tops, call it what you will, before reality takes over, by which time it will be too late. Only the timing is unresolved?

 

[sassa]

Reading this makes one think seriously about the continuation of the bull,the inefficiencies of the big 4 and the troubles to come in the markets ahead.

http://www.prudentbear.com/index.php?option=com_content&view=article&id=4809&Itemid=53

 

[Awesomandy]

Reading this makes one think seriously about the continuation of the bull,the inefficiencies of the big 4 and the troubles to come in the markets ahead.

http://www.prudentbear.com/index.php?option=com_content&view=article&id=4809&Itemid=53

Interesting article - although I would imagine that there may be a degree of bias, given the name of the site.

I'm not an expert in pricings, but from what I know, it's a very gray area. Even level 1 assets are not immune to being mis-priced. Say, I can hold stocks in a small company. Shares are being traded everyday, so you would still have your bid/sell prices, but the next day, the market implodes onto itself, and all the buyers disappeared. My holding that was worth $1m yesterday is now worthless when I need it most. Of course, this is a very extreme case, but I would imainge that this scenario is much more probable for the such of level 3's.

And then, even when in much more stable times, how do you price a level 3 asset? From a more pessimistic view point, a level 3 asset is basically a piece of paper the bank has written to itself and/or other banks, and then being valued by a model that is also developed by the bank. i.e. they have a licence to write their own money. In the good times, it's not really a problem, as virtually everyone's making "profits", and nobody complains, and the machine keeps on rolling.

But then, when the bad times come around, somebody might get a little scared of the risk, and start pulling their money out. The valuation drops, and, given that these new and complex instruments are most likely highly leveraged, we'll see the value plummets very quickly - possibly anywhere up to 50% overnight. Then we are in trouble - this bank has just lost the value of half of its capital, and I would be quite certain that the market will price that in at light speed, and everything else falls into this black hole.

So, basically, my point is that even though they can mark their assets in any way they want and gives the bank whatever profit it wants, when the bad time comes around, everything that doesn't have a buyer would be virtually worthless.

 

[Whiskers]

There are some mixed messages coming out of the US economy. The Consumer Confidence number yesterday was down a little, but not alarming.

Mortgage application figures released today are up, but it is felt this is distorted a bit by people refinancing and some making multiple applications.

The latest numbers for nonfarm employment growth are up. So it will probably come down to the GDP figures due out in another half hour or so.

My feeling is that despite the subprime problems, the US economy is not stalling as fast as some expect. Unless the GDP numbers are particularly bad, I am still inclineing to the fed holding for now... and we get that market correction forthwith.

For what it's worth gold was trending upwards, but came off in price after the employment numbers came out.

Wednesday, October 31, 2007, 8:15 am EDT

Nonfarm private employment grew 106,000 from September to October of 2007 on a seasonally adjusted basis, according to the ADP National Employment ReportTM. The estimated change in employment from August to September was revised up 3,000 to 61,000. October’s increase of 106,000 marked an acceleration of private nonfarm employment after three months (July through September) during which the average monthly change was just 43,000. http://www.adpemploymentreport.com/report_analysis.aspx

 

[Whiskers]

US GDP stronger than expected.

Plenty, but not all economists are still predicting a .25% cut. I'm still in the minority... no cut.

ECONOMIC REPORT

U.S. economy grows at 3.9% pace in third quarter
Best growth since early 2006 driven by consumers, exports, military
By Rex Nutting, MarketWatch

Last Update: 8:52 AM ET Oct 31, 2007Print E-mail Subscribe to RSS Disable Live Quotes

WASHINGTON (MarketWatch) -- The U.S. economy shook off the worst housing downturn in a generation to grow at a 3.9% annual pace in third quarter, the best performance in six quarters, the Commerce Department estimated Wednesday.

The increase in gross domestic product was better than the 3.4% gain expected by economists surveyed by MarketWatch. See Economic Calendar.

Growth was well balanced in the period from July to September, with strong contributions from consumers, exports, capital spending, military spending and inventory building. Housing investments continued to be a major drag on growth. Read the full report.

Despite rising worries about commodity prices, the GDP price index, the broadest measure of price changes in the economy, rose just 0.8% annualized, matching a nine-year low. Inflation hasn't been lower since John F. Kennedy's administration.

Consumer prices rose 1.7%, while core consumer prices, which exclude food and energy prices, rose 1.8%, just within the Federal Reserve's target zone.

The strong GDP report is unlikely to sway members of the Federal Open Market Committee to hold off on another rate cut later Wednesday. Markets and economists are nearly positive that the FOMC will cut its overnight lending rate by a quarter percentage point to 4.50% at the meeting, in a bid to pre-empt any economic slump stemming from weak housing markets and malfunctioning credit markets.

http://www.marketwatch.com/news/sto...x?guid={33464B2D-9070-4B37-95AA-E18239F34960}

 

[Kauri]

A couple of things to mull over...
Cheers
...........Kauri

Oct 31.
There are a few themes developing for the Asian session that the market should
eye closely -
* Baltic Dry Index - In a sign that the commodity bubble may burst, the Baltic
Dry index fell 230 pts today to close at 10,656 and biggest fall for the year
after continual record highs in recent sessions; This move defies the gains to
record highs in oil and gold today and could signal a turn for commodities,
which would be bearish for AUD, NZD, CAD & ZAR

* China Petrol Price Hike - numerous press outlets reported today that China
will hike petrol prices for the first time since May 2006, fuelling inflation
and pressuring consumers and businesses, with risk for China stocks eyed on the
price rise, particularly with recent, consistent comments from Ex-Fed Greenspan
warning of a China stock bubble

* The USD losses despite a hawkish Fed - There is increasing speculation that
the broad-based accelerated selling of the USD against a range of currencies has
been sparked by a central bank or sovereign wealth fund, raising the possibility
that an Asian or Mid East country is preparing to shift from a USD peg to a
basket of currencies; particularly with the USD weakness fuelling double digit
inflation in the Middle East due to the USD peg.

 

[Kauri]

A couple more (rumours) for mulling...
Cheers
...........Kauri

November 1.
Bonds are smartly bouncing off their overnight lows, somewhat in response to
the disappointing earnings from Exxon, which is weighing on the equity complex,
though more so off of talk that Citi bank, which as was the case with Merrill
faces massive subprime/credit writedowns. The scuttlebutt is throwing numbers
upwards of $30 bln in losses or loss provisions to be taken by the bank.

 

[CanOz]

A couple more (rumours) for mulling...
Cheers
...........Kauri

when do Citi report?

 

[insider]

A couple more (rumours) for mulling...
Cheers
...........Kauri

Don't make me cry, Kauri

 

[Kauri]

when do Citi report?

Hi Canni,
Not sure...I don't play the U.S equity markets... it seems it's more to do with analyst downgrades... so far...
Cheers
.........Kauri

November 1. The equity complex is not receiving a warm welcome into the new month as analyst downgrades of Citigroup at two investment banks has thrown ice water on Wednesday's party. One of the analysts suggests that the money center bank will be forced to cut its dividend and raise more than $30 bln to shore up its capital.
The S&P cash index closed the month of October at an all time record high (which was convenient for hedge fund mark to markets) and was just shy of closing above the all time intra-month highs. Today however downside targets will be more useful.

 

[Kauri]

Don't make me cry, Kauri

Insider,
OK, just to cheer you up a tad.. :hide:

Cheers
...........Kauri

Nov. 1. The AUD/USD continues to consolidate around 0.9220-40 after the morning decline but risk remains to the downside in the wake of the news that Goldman Sachs has downgraded the mining sector of stocks from "attractive" to "neutral." The news has seen stocks such as BHP Billiton, Rio Tinto and Xstrata all under selling pressure in London this morning. The news has also hit the base metals complex with copper prices lower and zinc hitting a seven-week low. This follows a decline in gold this morning which has dipped under $788.00/oz, down from highs above $796.00/oz in overnight trading.

 

[ithatheekret]

From what I can gather the US markets firmly believes Abby is right and the Dow is going to 15000 , the only problem is I think she forgot to mention when

I'm rather interested in the effect we will see in the financials once the first quarter credit resets hit . The market commentary would have us believe it's all over , but my calculations say it will take longer to show effects than an interest rate rise ( approx.18mths ) .
In fact I'm waiting anxiously so I can buy banks for bottom drawer fillers and be ready for the next run .

I have the All Ords projected at 7300 for its next target and also believe the two no-brainers BHP and RIO will double in share prices , this eventuation could see the All Ords go stratospheric .

 

[Kauri]

Ooooops...
Cheers
...........Kauri

Nov. 1. The credit concerns have been extrapolated by the news that the Fed has just injected at $41 bln repo and the largest since the credit crisis began. The concerns have seen the market now increase the chance of a December 25 bp rate cut, particularly after pricing out such a move yesterday on the hawkish FOMC statement. US ten-yr bonds yields remain near session lows of 4.378% on the credit concerns, down from 4.50% overnight.
USD/JPY has stalled at 114.60 but risk remains for stops to be triggered under 14.50/60 for a move lower.

 

[Porper]

Thought this chart of the Dow was interesting.Only just noticed it unfortunately.

The patterns in the red boxes are uncanny in their likeness.

The bars above the two wave B's are very alike, and judging by what the Dow is doing as I write the next bar will be identical as well.

If the bigger count is a wave a,b, and C the two patterna will be similar, but they don't usually match as well as this.

Not to say we will go all the way down to the 13000 area, but it is looking more like it.

 

[tech/a]

Porper.

Nice pick up.
If symetry remains the same A and C then your projection is highly likely.
It did in the last move.

 

[dj_420]

From what I can gather the US markets firmly believes Abby is right and the Dow is going to 15000 , the only problem is I think she forgot to mention when

I'm rather interested in the effect we will see in the financials once the first quarter credit resets hit . The market commentary would have us believe it's all over , but my calculations say it will take longer to show effects than an interest rate rise ( approx.18mths ) .
In fact I'm waiting anxiously so I can buy banks for bottom drawer fillers and be ready for the next run .

I have the All Ords projected at 7300 for its next target and also believe the two no-brainers BHP and RIO will double in share prices , this eventuation could see the All Ords go stratospheric .

With sub-prime jitters re-emerging I cant see our market going that well. I personally would stay away from financials as even if they dont have exposure to sub-prime they will get hit hard anyway.

Our markets look to open around 140 points down at the moment. I missed the short last night.. grrrrrr, so Im waiting for a nice bounce from which to set up some shorts.

Marketwise sitting on around 70% cash, I will liquidate today another 10% cash and wait for the impending correction.

 

[Porper]

Porper.

Nice pick up.
If symetry remains the same A and C then your projection is highly likely.
It did in the last move.

At work so can't post a chart but both the Dow and the XJO are way overbought on the weeklies and the daily's (on my oscilator set up).

Doesn't mean to say we are going down, but the more evidence I get the more it looks likely we are going to get a correction or at least sideways for a while.

 

[Awesomandy]

Porper.

Nice pick up.
If symetry remains the same A and C then your projection is highly likely.
It did in the last move.

That looks good - very interesting indeed.
Although, it still looks to be a set of higher highs and higher lows. So, after this cycle play itself out, I'm in a way hoping that it would test new highs once again.

 

[sassa]

I have the All Ords projected at 7300 for its next target and also believe the two no-brainers BHP and RIO will double in share prices , this eventuation could see the All Ords go stratospheric .

That is a big call.What's your time frame and your reasoning with the doubling of BHP and Rio Tinto especially when there is a downgrade for global growth and the biggest consumer of all looks like they might enter a depression.