Talking the fix that finally works

10/9/08

What will that fix be?! This is the question being asked by everyone over the world now. The US government plan said that they will be injecting capital directly into banks by taking an equity stake this morning has failed to impress the markets again. The theory sounds good and somehow I feel this is a smart option announced by the US government to date so far. Unfortunately, timing continues to be the major debacle of the Bush Administration. The Bailout plan would not start running until the end of the month at earliest. The market wants a fix NOW. However, there are few answers to this. Some economists are calling for another round of coordinated rate cuts while others are calling for stimulus checks and direct loans to small business. CNBC ( the worst sucker in media ) is even talking about the Fed possibly buying equity futures, but ultimately none of these solutions solve the crisis of confidence in the banking sector. All in all, Banks are in the business of taking risk and it is THE TIME that they take on some risk and do unfreezing the credit markets. Also, as I posted before, G7 meeting is next hope. Now, the fool master Treasury Secretary Paulson is asking for an emergency G20 meeting this weekend to discuss the financial crisis. This will be the most significant G7/G20 meeting since the 1985 Plaza Accord which marked a major turning point for the US dollar. At that time there few nations attending the event agreed to intervene in the currency markets and to sell US dollars to reduce the US current account deficit and to pull the US economy out of a serious recession. Would this time could save our ( US ) mess?! It is best to see if they would intervene our currency and enough to surprise the stock markets as well. It is a possibility and let us wish it would work.

Fear still in play with the 7th straight down day

10/9/08

It is another sad day today. Fear is still growing bigger. Dow closed at 8579 and has already below the Fib 76.4% level. On a biggest scale, it has chance that Dow will drop down to the 7200. In fact, this chance is getting higher. As I write this, Japan Nikki has already open down 11%. Sell-off tsunami is playing on. It is irrational and no one has any confidence at all. I noticed market keep behave opposite as Libor rate. If libor rate get stable or revise down, the market would hold and may have recovery rally. If libor rate keep going higher, market will tank. There is no meaning to give any support level technically since the market is breaking each support that I see so far. But, as a chartist/technical analysis/market strategist, next support is 8500, 8300, 8000, and 7200 ( bottom of 02 lows). However, do not rule out it could drop below 7200. Let wish the G7 nations meeting will come up some form of rescue the whole world.

Global Rate Cut is no help to market either

10/8/08

Dow closed down 189 points and it is the sixth down day in a row. I remembered the longest losing days for major indices are 9 days during the bear market run from year 2000-2002. Now, the investors has totally lost confidence at all to whatever our US government, Federal Bank, and Treasury do. Nothing could stop the market free fall. All support below current levels are just guesswork. We have to see one big gain day to stop this mud(mad) slide. Needless to say, let the market itself find its equilibrium. Even, all technical data suggest the market is deeply oversold but it does not make a buy suggestion. This is far worse drop ever since the market crash 1987 & Great depression 1929. Now, bear market is built in fear. As fear growth unstoppable, there is no bottom you could see. Well, it will stop somewhere when there is no more sellers. Tomorrow, the short-sell rule ban has ended and let see how market react then.

Nightmare is just beginning

10/7/08

Why I not post anything yesterday?! Today's market action has showed the evidence. There has never been follow through day after each possible reversal day. Anyway, the chart above will guide you we are really really close to bottom. Market will bounce any moment. We are already nine years into the first decade of the 21st century, and those first nine years are on pace to be the worst start to a decade since 1930s. Unless we get a major rally to close out the year ( 15%+)
However, I have other data to suggest the Nightmare is just started. The powerful correlation between margin debt usage by member firms of the NYSE and the trend of major indexes suggest further selling ahead in the main indices. The super large leverage accumulated during the last bull market is now forcefully being undone by a powerful combination of margin calls and acceleration market losses. Also, combine with credit crunch and decreasing house prices. We are soon surely into phase two of recession or depression. Now, it is very certain 100% US is getting into a very pro-long recession ( At least years to two ). I have been saying this and predict this months ago and give caution to my blog readers. Unlike Fed Chief now he finally accept that US is into recession. Do anyone notice the main stock indices are diving hard each time our Fed/Treasury did some sort of bold action/plan?! Big players are not buying it each time and so are we/me. We gonna fire Fed Chief, Treasury Chief, Bush....etc. They do not know how to fix our problem at all. They all have no clues. The market has showed us the $700 billion plan is not gonna help at all as I said before. Next support for Dow is 9000. Below that level is 7800-8000. Remember the last post I said " Fasten your seat belt ". That's my bold statement before Monday and today action. Now, I guess you all know why I have keep my extreme bearish from start of this year. It has proved me no wrong at all. Good luck!

What's next?!

10/5/08

Are we bottomed yet?! Technically, the stock markets are in very oversold and the market breadth is very very close to extreme bottom. Just keep watch the price reaction. It surely will rebound very soon. Beside to describe it from technical point of view, market may keep going down more. Why?! The big players are watching the credit market, they need to see if the condition has improved. Therefore, it may takes two to three days to confirm if there has any improvement. Well, will market crash from here?! Let see! Fasten your seatbelt. Really, I cannot precisely pinpoint if the bottom is in sight as lots of traders in Wall Street. But I surely know the market will sure have very nice bounce and will keep going down again afterward.