Imminent and severe market correction

[>Apocalypto<]

Trade it....

Same applies:- S&P moves in quarter point increments

But most retail traders trade the ES-minis and not the S&P...

Cheers Frank

 

[dhukka]

For the first time the title of this thread might actually be accurate IMO. Markets are still grimly holding on for a rate cut however the Fed looks to be drawing a line in the sand. On the one hand they have reduced their growth forecasts for next year and see inflation peaking in 4Q07 - ammunition for a rate cut, yet their outlook for unemployment (to stay below 5%) and commentary suggest that further rate cuts are not warranted at this time:

"Participants generally agreed that the available data suggested that consumer spending had been well maintained over the past several months and that spillovers from the strains in the housing market had apparently been quite limited to date. Nevertheless, a number of participants cited notable declines in survey measures of consumer confidence since the onset of financial turbulence in mid-summer, along with sharply higher oil prices, declines in house prices, and tighter under-writing standards for home equity loans and some types of consumer loans, as factors likely to restrain consumer spending going forward. Moreover, anecdotal reports by business contacts suggested a softening in retail sales in some regions of the country. Participants expressed a concern that larger-than-expected declines in house prices could further sap consumer confidence as well as net worth, causing a pullback in consumer spending. All told, however, participants envisioned that the most likely scenario was for consumer spending to continue to advance at a moderate rate in coming quarters, supported by the generally strong labor market and further gains in real personal income."

The US market supposedly rallied in the last hour of trade due to rumours of an emergency Fed easing. Whilst not out of the realms of possibility it looks unlikely.

It looks more and more like a replay of August only this time credit problems are worse... actually most things are worse (housing, corporate profits, consumer and business sentiment, manufacturing). Add to that, the likelihood of the Fed riding to the rescue either at the December 11th meeting or before looks doubtful. Without that psychological intervention by the Fed an imminent and severe correction is on the cards IMBO (In My Bearish Opinion).

 

[Kauri]

The US market supposedly rallied in the last hour of trade due to rumours of an emergency Fed easing. Whilst not out of the realms of possibility it looks unlikely.

.

The rumour surfaced early on, pretty much in direct contradiction to the Feds outlook, when the affect wore off it was given a second run towards the close, pulled the market up nicely if you were in the know. Interesting to see the Nikkei has discounted it today... wonder what rumour will be Fed to the punters tonight???
Cheers
..........Kauri

 

[Edwood]

here's another take on Dow theory

http://www.safehaven.com/article-8851.htm - Sol Palha has called it pretty well on the way up, lets see how we goes now....

....a couple of charts comparing DJIA to UTIL - daily and 15 mins

 

[ithatheekret]

I go with an old theory on the Dow transports , something that has been out of sight out of mind to the majority market stateside .

So goes the transports index , so goes the rest .

Of course the fact that starbucks is not looking good lately and that is a very good barometer for their markets and the economy ( consumer spending side ) ......

 

[Awesomandy]

With HSI down 4%, N225 at 14,837, and FTSE down about 100 points, it looks like this might be it.

 

[Edwood]

hi ithatheekret, I don't follow either theory fwiw was just flagging the alternate view. based on tonights US close I think that puts us into a bear market according to classic Dow theory - is that right?

 

[bean]

hi ithatheekret, I don't follow either theory fwiw was just flagging the alternate view. based on tonights US close I think that puts us into a bear market according to classic Dow theory - is that right?

Yes it does
*****
However, the reaction high of the secondary move would form and be lower than the previous high. After making a lower high, a break below the previous low would confirm that this was the second stage of a bear market.
Primary Bear Market - Stage 2 - Big Move

As with the primary bull market, stage two of a primary bear market provides the largest move. This is when the trend has been identified as down and business conditions begin to deteriorate. Earnings estimates are reduced, shortfalls occur, profit margins shrink and revenues fall. As business conditions worsen, the sell-off continues.
****

 

[ithatheekret]

hi ithatheekret, I don't follow either theory fwiw was just flagging the alternate view. based on tonights US close I think that puts us into a bear market according to classic Dow theory - is that right?

Yes mate , and it's official for Japan too .

We'll see in 6200 tomorrow , if there's too much earth shattering across the other bourses , we could see in anything close to 5800 after that ....... and below that level I believe is 5400 then 5300 .


We''ll have to see how hard everyone else gets hit first , as they will share the pain around .

 

[wavepicker]

Yes mate , and it's official for Japan too .

We'll see in 6200 tomorrow , if there's too much earth shattering across the other bourses , we could see in anything close to 5800 after that ....... and below that level I believe is 5400 then 5300 .


We''ll have to see how hard everyone else gets hit first , as they will share the pain around .

I don't beleive this will the case just yet, a rally might start soon that might well carry into Feb next year, then the bear campaign will start in earnest here

Cheers

 

[aaronphetamine]

Yes mate , and it's official for Japan too .

We'll see in 6200 tomorrow , if there's too much earth shattering across the other bourses , we could see in anything close to 5800 after that ....... and below that level I believe is 5400 then 5300 .


We''ll have to see how hard everyone else gets hit first , as they will share the pain around .

Gday mate, this is my first post in this thread but i avidly read here daily!

In my opinion i dont think we will see 6200 tomorrow at all, this is my reason/s and they arent technical or anything just based on my feelings considering that ;

The Nikkei closed slightly up
The FTSE is currently up nearly 30 points at the moment... and,
The US markets will be closed becuase of their thanksgivings, so no more bad news will be coming out until they trade on friday.

It seems that any chance the aussie markets have of trying or attemping to try and claw back, they have done recently.

Your views please ?

 

[ithatheekret]

Gday mate, this is my first post in this thread but i avidly read here daily!


Your views please ?

G'day aaron

Copper , Lead , Zinc and Banks all have woes at the moment and we'll be the only port open for the sailors to riot in ......... so I'll be watching the bids on the LME base metals and for news on NAB and Rams etc.

 

[Trembling Hand]

I don't beleive this will the case just yet, a rally might start soon that might well carry into Feb next year, then the bear campaign will start in earnest here

Cheers

Not picking you out (I'm sure you have given it more thought than most) but why do we have to go from a Bull to Bear market?
Stocks don't just go up or down, many(most?) go nowhere for a long time. Why don't I see people considering a sideways market. Why is it that it seems everyone is looking for gloom?

 

[wavepicker]

Not picking you out (I'm sure you have given it more thought than most) but why do we have to go from a Bull to Bear market?
Stocks don't just go up or down, many(most?) go nowhere for a long time. Why don't I see people considering a sideways market. Why is it that it seems everyone is looking for gloom?

Depends what timeframe you are talking about TH.

BTW, A sideways market can be just as frustrating as a bear(especially if you long term holder who has been used to the instant returns of the last 5 years!!).

THE DJIA was in a sideways market from 1966 to 1982 but is was often termed the bear market of the 70's.

 

[>Apocalypto<]

Depends what timeframe you are talking about TH.

BTW, A sideways market can be just as frustrating as a bear(especially if you long term holder who has been used to the instant returns of the last 5 years!!).

THE DJIA was in a sideways market from 1966 to 1982 but is was often termed the bear market of the 70's.

This post is to both of you guys, Wavepicker and Trembling hand.

from what i have read in my Gann book, Distribution on a weekly chart can last for a long time at the top of a bull market before it starts to descend with force and speed. Not trying to say i am right, I actully agree with both of u and think you both make good points.

 

[wavepicker]

This post is to both of you guys, Wavepicker and Trembling hand.

from what i have read in my Gann book, Distribution on a weekly chart can last for a long time at the top of a bull market before it starts to descend with force and speed. Not trying to say i am right, I actully agree with both of u and think you both make good points.

Hello Joseph,

This is what I have noticed in the past. After a long trend, a market may either :-

-Enter a long term consolidation, from were it can either start a new trend in the opposite direction OR put in a final blowoff high before changing trend.

-Enter a distibutive or stuggling trend such as an Ending Diagonal and change trend

-Or simply blowoff or capitulate(depending if a bull or bear market respectively) before changing trend.

These are just SOME of the possible scenarios and there are more(Mclaren covers most)

Cheers

 

[ithatheekret]

Xstrata ..... nearly all the oiler and gas plays , quite a few banks all heading south on LSE .

Few base metals sluggish , other digging holes , zinc is up . Gold is above $800 so there's a couple of positives .

I shouldn't have said tomorrow for 6200 , apologies , but tomorrow should start it off . I expect a Christmas rally for Santa , that's a must , especially if they rally for George .

5200 5300 5600 5800 6200 6300 6500 6800 are all the ranges we have seen . These were stages of capital investment , that money is already starting to be protected , it's everyones super etc. , which at times can be sidelined and hoarded until ready for use .

It goes into the market at stages , each move measured by events , supports , fundamentals and technicals . Then we had the news that all stockmarkets hate ...... interest rate rise , the next one will have us at 7% .

Offshore foreign investors are already worried about a few bank holdings related to subprime issues , credit has shut shop for the rest of the year and might come out next year .

Value and Quality are the sort afters , added to that flights to safety , but ..... when it hits everything get's hit .
Gold , silver and their stocks anything of value that can put liquidity in motion will be attacked . Supports as always will come from Asia for prec. metals , unfortunately other westerners don't see it that way and can exhaserbate the swings after a holiday ...... nothing is sacred to them , except ........ perception , ours , of their investment market .

The news on the big economy front is bad USA softening is a nice word , but they've been in a technical recession for nearly a year , the statements on WMDs held more credence than the statistics spat out at the markets .
They're not the only ones , Japanese spinners were touting solid growth blah , blah , blah ....... first cab off the Recession rank . ..... and two major banks there have heavy subprime issues too , except we don't know yet

With the softening in the US , companies here that have their operations concentrated on the US consumer and so on will also need to be placed in the fridges butter tray .

All the troubles are just starting to emerge though and the unwind will folllow until confidence returns .
The double blow on our indexes are the ores and the banks ...... on top of an interest rate rise , one notch off 7% .

 

[macca]

Seems no one wants to buy their cr**py paper in Europe either now

<Europe Suspends Mortgage Bond Trading Between Banks (Update3)

By Esteban Duarte and Steve Rothwell

Nov. 21 (Bloomberg) -- European banks agreed to suspend trading in the $2.8 trillion market for mortgage debt known as covered bonds to halt a slump that has closed the region's main source of financing for home lenders. >

http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aLzGEmrjr0fA

I guess this is the "left field event" we keep looking over our shoulder for

2008 looks like it might be a good time for trading short CFDs and indexes

 

[Uncle Festivus]

Stocks don't just go up or down, many(most?) go nowhere for a long time. Why don't I see people considering a sideways market. Why is it that it seems everyone is looking for gloom?

The data for me indicates a bearish stance, while not actively 'looking' for gloom, because it's not hard to find these day's .

Interesting discussion/comparison of Dow theory and sideways markets.

A quick observation could assume that our market has also been 'manipulated' by situation stocks while the rest of the market has been flat, resulting in the head formation, now right shoulder in the XJO?

FWIW, maybe our equivalent for Dow theory style comparisons is consumer discretionary XDJ and ASX200 XJO?

A clear divergence since May 07. Is the Aussie consumer tapped out also?

 

[ithatheekret]

I don't think there's that much too it all to be honest . Corrections are healthy , we can't just keep going up , fundamentals and gravity , whilst unfortunate , are a necessity .

If we look at the money be taken out of the market , we know it will come back , it's just a matter of when .

Funds managers are cyclical in their investing , each going through different stages of investment as they see what fits best , if it doesn't fit they sideline the cash for later .

They evaluate the market thoroughly before dipping their toes , be it in large caps for growth , small caps for value , emerging markets or the international big boards .

What is important is the base economy which the companies operate in and the conditions within that economy .

Right now I'm watching the banks get closer and closer to my entries , soon I hope I will have cheap bank stocks tucked away , the yield on them is still very attractive to me , I just want them at a lower price .