With the Dow breaking through the resistance level set in August, the natural question that follows is: What's next? The next support line was set in March 07. (Btw: The SP500 is now around the October 06 level!!!)
Possible rays of hope are:
1. Bernanke's fairly complacent remarks regarding the economy, could put enough tension between what is expected and what happens, causing a lift to the DOW, even with a .50 bps cut especially if things get worse next week(on the other hand, the fed futures are pricing in a 50 point cut as a done deal). Considering his remarks, I believe that a 75 point cut is out of the question. Bernanke does not what to shoot his load to early, since there is still a lot of '2008' left.
2. It seems that many insiders are buying up their own stock, which could signal a possible short-term bottom (at least a temporary retracement).
3. Stocks are becoming oversold very quickly, at a time when the U.S. still is not technically in a recession. I hear many people throw this term around without knowing what it actually means: Two consecutive quarters of negative growth. Guess what, we aren't there quite yet!
4. In terms of risk aversion, the carry trades have shown themselves to be surprisingly resilliant. In many ways curiously so. The month long channel in the EUR/AUD, which has been moving horizontally, is actually starting to bend toward the AUD, which is amazing considering that we just experienced a -300 and then a -50 drop in the Dow. Could this be due to investors anticipating a possible bottom and a heafty rate cut?
Mind you, I am talking about a temporary retracement. In the long run, we will experience a bear market (but we haven't reached that 20% yet.) The key for me will be how Wall Street reacts to the upcoming rate cut. If there isn't a significat sign of relief, stay out of those equity and care trades for a while.
rudenstein
Possible rays of hope are:
1. Bernanke's fairly complacent remarks regarding the economy, could put enough tension between what is expected and what happens, causing a lift to the DOW, even with a .50 bps cut especially if things get worse next week(on the other hand, the fed futures are pricing in a 50 point cut as a done deal). Considering his remarks, I believe that a 75 point cut is out of the question. Bernanke does not what to shoot his load to early, since there is still a lot of '2008' left.
2. It seems that many insiders are buying up their own stock, which could signal a possible short-term bottom (at least a temporary retracement).
3. Stocks are becoming oversold very quickly, at a time when the U.S. still is not technically in a recession. I hear many people throw this term around without knowing what it actually means: Two consecutive quarters of negative growth. Guess what, we aren't there quite yet!
4. In terms of risk aversion, the carry trades have shown themselves to be surprisingly resilliant. In many ways curiously so. The month long channel in the EUR/AUD, which has been moving horizontally, is actually starting to bend toward the AUD, which is amazing considering that we just experienced a -300 and then a -50 drop in the Dow. Could this be due to investors anticipating a possible bottom and a heafty rate cut?
Mind you, I am talking about a temporary retracement. In the long run, we will experience a bear market (but we haven't reached that 20% yet.) The key for me will be how Wall Street reacts to the upcoming rate cut. If there isn't a significat sign of relief, stay out of those equity and care trades for a while.
rudenstein
