Wednesday, January 30, 2008

Fed does confirm recession in rate cut decision

1/30/08

Fed does make rate cut 50 basis points today to avert economy going recession. However, in my opinion, fed does reduce 125 basis point within 30 days period and this act has been proved that US economy is really Really in bad shape(even when last recession the Fed did not cut 125 basis point within such short time frame). As I mentioned yestersday, market does react the 50 basis point cut and rally from negative zone to almost 200 up points but closed below 37 at 12442. This is it and traders are waiting to see the employment report friday. Enough for US stock markets lately.

Chinese Shanghai Composite index has been on an agressive rise and has been failing to the downside since last Novermber. That downward force has not taken the index to a major critical support level. This level need to hold or the Shanghai could experience a precipitous drop from here. If that happen, it would put pressure on US stock market as well. Let us put attention on both market closely.

Hong Kong HangSeng Index need to be retest 22000 level and eventually it will test 20000 or lower to 18000 level.

Anyway, global stock markets are in a critical moment to decide it has longer bear market or not.

Dead Cat Bounce rally near an end

1/29/07

Last week US stock market posted first week up since New Year began. With Fed big rate cut 75 basis point to kick in the retrace dead cat bounce rally, traders are focusing tomorrow Fed meeting results as well as the job data on this friday. At this time of market, rate cut does not help the Stock market at all. Earnings coming in so far has been mixed and reflective of the health of US economy. So, 25 basis point tomorrow, market down...even with 50 market still down. If there is 75 basis again, market will ignite upward around Dow 12800 but market will going down again within 2 days.
I personally just sold my long time investment(Mutual Funds) because the Dow stock charts show me on monthly basis that the long(started from year 1982) term trend line has been broken and more likely this bear market will last longer than dot com burst period. The reasoning is very simple because housing industry is far from bottom and our houses are biggest investment in human life time and this housing bubble burst cause the house market in the worst ever since us great depression year 1929. Good luck to people who still think US economy would get better quick and stock market will be bullish very soon.