DislikedThere are voices for 2008 being THE next bull market coming and the same for the opposite. Can really only the future tell or is there someone with some real clarity?Ignored
when we seek clarity, all we get is a hazy moon. such is the nature of enlightenment.
as for the 2008 market direction, the funds and banks are tightening up their shoes. should be another spike up to crush the puts before they all race for the exit in a week or so.
my crystal ball continues to say that this is a bear/liquidation market waiting for confirmation (in the form of a bankruptcy). "you will experience a bear market for most of 2008, after a two-week rally in the first half of january."
and a bull market for 2008? it cannot happen without the cyclicals and financials leading the way. i do not see this as being likely over the next year because i believe that we are at the end of the beginning of the sub-prime shakeout, not the other way around.
i am unsure if the subprime asset holders know their own exposure; their risk management is incompetent. the cmo/cdos are collateralized and bundled derivatives passed off down the line. as the underlying values change hour by hour, how much is each tranche worth? in a prior post i pointed out that all this subprime stuff is leveraged - so to get out from underneath you have to sell ten times the assets (i.e. stocks) to clear the face value of the subprime, which is how the subprime is affecting the global equities markets.
by the way, maybe i should not bring this up, but what are the current exposures of the portfolio insurers? are the funds around the world set to beat the insurers to their sell program buttons? are the index futures arbs ready with their programs? and are the specialists well enough capitalized for these possibilities? these are machines against machines and humans are not part of their calculus.
there is not a lot of upside potential whereas the downside is deep and dark. i'd vote for a bear in 2008.
but oscillator traders are all seeing an oversold market right now and the funds will want to clear out the puts for their own run down. i'd bet on a couple of up-spikes, prior to the big hard down of 2008.
best to scalp long and not stay out all night because one morning could see an open 500 points down due to a bankruptcy, which would be that confirmation the big guys with their fingers on the sell program buttons are all currently waiting for. note that exxon was up $4 recently, which was fidelity selling off assets and rotating into oil. the big money is positioning for a crash and it only takes a single match to set off a fire sale.
consider citi's abu dhabi cash infusion. most think this is a very good thing but citi did not move much on volume of 180,000,000. this means that citi is close to capital impairment. if it slips back under $30, the option strikes are waiting. citi hitting $25 might be taken as a confirmation signal.
the serious realization is that all the big banks around the world have asset profiles similar to citi, with a consequent affect on their capitalization. this is really not good because banking is just a house of cards.
and shall we contemplate the effect of a terrorist attack on a financial center - say London??
i've always thought that bic lighters would make the best currency after a meltdown: a portable medium of exchange, a good store of value, and with more useful intrinsic value than gold.
update: it is now 11/28, wed, one day later, and the market did spike up today 331 dow points sidelining the puts. after another 100 up points tomorrow this first bounce will be finished and the way will be clear for a run down on friday. next bounce up is scheduled for the end of the year into january.
realize the universe is one thing,
and attach it to your body