Bloodbath selloff

2/29/08

As expected, Dow reached the resistance point area 12750 then big selloff kickin and today closed at barely above 12250(closed 12266). The Nasdaq finished at 2271 a 17-week low and has broken down the triangle formation. Gold keep rising to 1000, Crude oil trading above 100 for few days and US dollar sinking to historical low. GDP on last quarter of 2007 is barely up 0.6% which the growth has stalled. More fearful economical effects will be coming and I will mention on the following:

It is about $45 trillion of credit default swaps out in the financial market. A default on a merely 10% would cause an economic disaster and I strongly believe it will happen. The whole downtrend for economic and stock market have just met the first quarter of the down ride. Here I quoted his from other blog "The credit swaps on MBIA, Ambac, and the homebuilders trade deep into junk, some priced outright for default. Is there any wonder Moody's, Fitch, and the S&P are reluctant to downgrade MBIA and Ambac? The ratings assigned to Ambac and MBIA are a joke." If MBIA & Ambac got downgraded by any rating firms, it will cause huge decline for stock market.

Keep in short, I believe Stock market is going into downward spiral and we will see the Dow trade below 1/2008 lows and heading into 11000 mark first. The burst started from summer of 2007 and it seems to me the downside ride has finished about quarter. There are more severe quarter road to walk. Happy trading in March.

More rate cut likely

2/27/08

Investors just need to take some profit after 3 days rally breakout from triangle formation that I mentioned from last post. Also, Dow is hitting the resistance level 12750 and formed bearish doji star candlestick pattern. But if Dow trade above 12750 and lasting long enough, it is very bullish side for equities. Also, US dollar is breaking history lows compare with other major currencies, like Euro/US trade above 1.50 level and Crude oil is trading above 100 for 2 days. With high inflationary pressure, high commodities and energy price, us economy is entering stagflation likely.