Big news out of Asian this morning with markets falling by massive levels as credit fears intensified, selling snowballed and authorities around the world scrambled to find ways to contain the crisis.The UK government announced a liquidity scheme for banks under which at least 200 billion pounds ($350 billion) will be made available to financial institutions, plagued by bad debts and a crisis of confidence.
We hate to mention the word 'capitulation' for the third day in a row but the raft of announcements and bail outs are doing little to soothe investors. Sellers drove the Nikkei down 9.4 percent, its biggest one-day percentage fall since the crash of October 1987.
Markets in Tokyo and Hong Kong plummeted 5 percent to 7 percent, and Jakarta tumbled 9 percent, after another dismal session on Wall Street that saw the Dow Jones industrial average notch its biggest five-day points fall ever.
European markets were sharply lower on the open, the FTSE down 100 points, the DAX down 168 points and the other Euro bourse are following suit.
The FTSEurofirst 300 index of top European shares has already lost 7.9 percent this week, on track to record its worst weekly performance since mid-2002. The index is down 33 percent year-to-date.
"I think for a few more days we are in a Mark Twain situation where we are more worried about the return of our money than the return on our money," Guy Monson, Managing Partner & CIO at Sarasin & Partners, told "Squawk Box Europe."
About the UK government's plan, "what we're really looking at is a giant backstop to the entire banking system," Monson said, adding that now "we have a banking system which is run directly by state guarantee".
Banks continued to get hammered, but news from other sectors of the economy was no better, with aluminum producer Alcoa reporting a lower-than-expected quarterly profit on softening demand on Tuesday after the bell, and saying it was halting major capital projects in the face of uncertain markets.
And Toyota Motor will likely post a 40 percent slide in annual profit, missing its profit estimates on weak sales in North America and slower growth in China, the Nikkei business daily reported.
Many have called the situation in Asia a 'panic' and some commentators in Europe are suggesting that panic selling is now in place in the Euro bourses. This then is the point at where a bottom may form, however we said some time ago that the charts were telling us a bottom would be around 4000, however, even we scoffed at our own prediction.
Still we can take solace in the fact that some people made really, really bad calls. Here are some from July 08:
Binky Chadha, Deutsche Bank’s New York-based chief strategist says "the S&P 500 will end the year at 1,650, up 29 percent from June 30".
Ian Scott, Lehman’s (err hmm) global strategist, is predicting "an advance of 27 percent to 1,630".
David Bianco at UBS said the index will increase at least 25 percent.
At the time Peter Sorrentino's a Cincinnati-based senior money manager at Huntington Asset Advisors, which oversees $16.7 billion, said “A monkey with an abacus is probably better at the end of the day,”. Nice one Pete..
In the search for a bottom many commentators are now giving us their opinions and Marc Faber, the so-called Dr. Doom, has joined the search party. "The market has become extremely oversold," said the author of the Gloom Boom & Doom Report. "I think we're at one of the most oversold conditions ever, maybe not quite as oversold" as during the Black Monday period of Oct. 19, 1987.
Faber sees a rebound beginning in early 2009, and advised investors to look to emerging markets stocks as the catalyst.
"If you're playing for a recovery in the global economy whenever that comes, I think you will have to position yourself in emerging economies' stock markets," he said.
He also favors investing in gold on the belief that global central banks will loosen monetary policy and drive down the value of their currencies.
Traders looking for plays in this market could do worse than look at the credit markets rather focusing on the indices for a guideline as to where we are.
"While everyone was focused on a major equity decline it was the best improvement in credit quality that we've seen in eight weeks across the board," said Kevin Ferry on Tuesday, of Cronus Futures Management. "All measures of both liquidity and systemic risk improved yesterday."
From our point of view we see the time is right to have your trading fingers at the ready, nobody can predict when it’s going to happen but at some point very soon this market is going to bottom out. The volatility that we will see will continue but higher highs and higher lows are on the horizon.
When the points are counted in 12 to 18 months time we will have seen the opportunities from here as the trading period of a lifetime and there will be some traders who will have made a fortune.
Download the system, fund the account and wait for the starter’s gun.
Take heed, however, this market is all over the place and risk is rife so please remember, it's 'Ready, Aim, Fire!" not "Fire, Ready, Aim!”
Source: HF Markets Online Trading
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