New Low for ASX S&P 200

The new low of 4400 has been hit over night. the index is back up to 4600 at 11am, one hour after trading started.
The news seems to be panicky and it is interesting to read the comments.

Presidential Elections Influence on the Markets

Here is a chart showing how prices move in the US in relation to the presidential elections cycle.

Stages in Market Cycle

Property VS. Shares

Another interesting chart. Property returns vs. shares.
From Hubb.com.

Australian Sharemarket History Since 1900

Other people believe this might be the bottom of the current crisis. Look at the sharemarket history chart.
It is fun to see renewed opinions that the market is soon to recover.

Phases in the Cycle

Here is how a market cycle looks like.



According to this chart, the current Australian market looks very close to Phase 1 - bottom.



I'd even say they are very much alike in the that period. The current level is very close to the weighted Moving Average for the past 210 days. This means that the theoretical conditions are met for the new bull phase to begin. Of course, this does not have to happen and the prices could keep on falling, as well.
Another indicator would be the length of the current bear market. The average decline lasted 8.6 months and the average recovery took 15.3 months. According to these statistics, the current market decline would fit the bill perfectly. The crisis begun in July 2007 but the market indices pulled back. Some state this was done artificially because of the last quarter result indicators for large investor funds. If we look from November 2007, July 2008 is just about 8.something months away. Should this be a recovery, by April 2009 the index should be back to its old heights. This sounds not quite likely with the fallout of investment banks in the US but then, again, markets always found their way up before.
I wonder whether the current rally, caused by bailout bill, will be the breakthrough one.

TARP Approved

The Troubled Asset Relief Plan has been agreed upon and sent to President Bush for signature. The bailout has happened, after all, before the opening of the markets tomorrow. Mmm, can't wait to see what happens now. Whether the rally will stop at 5200 or will it break through.
There are lots of comments popping out right now and it's interesting to read through them.

WaMu is Down

Another victim of the financial crisis. Washington Mutual just got sold to JP Morgan Chase. The Federal Deposit Insurance Corp took over the bank and sold it at an auction to JP Morgan.
It's such a clearance out there. Well, at least in the US. Other markets seem to be doing OK for now. Brits have had the closest situation to that in the US but that seems to be it. No other country announced anything similar. That is the positive side of the whole situation. The financial institutions in the US will, most probably, become much less significant in the world markets from now on.

The Dummy Guide to the U.S. Financial Crisis

The Dummy's Guide to the U.S. Financial Crisis - Seeking Alpha

Excellent summary of the current financial crisis in the world. It's been on for quite some time. The downward spiral was in the making in 2006. First write-offs started in 2007. It got hot around August and September 2007. Then, in 2008 we saw the collapse of Bear Stearns, Lehman Brothers, and other banks.
The U.S. government has had enough and is now considering the plan to systematically sort out the issue.

The Size of Bailout

Just to illustrate the size of the government intervention in the investment markets, here's a quote from the news today:

Business Spectator - Final US bailout deal close: lawmakers

The bailout exceeds total lending by the International Monetary Fund since its inception after World War II. The IMF has loaned $US506.7 billion since 1947 to countries in crisis as far flung as Argentina, Britain, Turkey and South Korea.

Debacle of Investment Banking

Obviously, the current era of investment banking is over. The largest
players are either gone from the scene or morphing into holding banking
companies. Macquarie in Australia is selling investment banking
business as the cost of borrowing rises.


At the same time the U.S. Congress is getting closer to a deal for
bail-out. The new era is to begin. It will probably be highly regulated
and the U.S. government will be the key player. They own the largest
insurance business and a stake of other large financial institutions.


Hopefully, everything will be a bit better and safer for a common man.

Reading Chart Patterns

IG Markets - Reading Chart Patterns

One of IGMarkets' seminars. How to read chart patterns.

Updating Quicken 2008

Quicken Support - Updating Quicken 2008 to the latest release manually

Here is the link to the support page listing all the patches for Quicken 2008. This is just to have a quick searchable link to point to the support site to search for patches for newer versions of the program once they become available. There are a few glitches with Quicken 2009 which will require patching.

Buffet Enters the Equation

Buffet is buying into Goldman Sachs. Starting with the announced bailout of the U.S. financial system, the news are getting better. Eventually, that will lead to a better economic outlook. This feels like having a patient rest after an operation. Actually the operation has not been even performed yet. Only the illness has been diagnosed. But at least there is some certainty regarding the outreach, potential effects, and outlook on the near future.

Another couple of (I believe) positive happenings are limiting of shorting and fall of investment banking concept. These are all big things in the economic sphere but should have some positive effect in the mid- and long-term.

The economic news are getting better. It's a psychological way up. The prices will follow with inertia.

ASX Trading Delayed

Oops. A correction to the previous post. The market is not yet officially open. It has been delayed for 30 minutes and will open on 10:30, so in about 10 minutes. The levels mentioned there are from the futures index.

Bull

Bruuuummmm!
Just had a peek at the Australian S&P 200 index. The speed at which it is shooting up is amazing. Current level is 4960. Wow, not that it broke through the resistance but is heading sky-high.
Looking at the chart reveals how much it jumped in only three days. This is about 15% so far. I had a bet on Wednesday and bought a little of Vanguard's Australian index fund. It was a bet that that was a very low point and a good buy. I could never think that it would go up so fast after that.
Twiggs says that this could be a trend reversal if it goes past 4950. The market has just opened and it's hovering around 4970 at the moment.

Another Hot Weekend

Last weekend brought some bad news about financial institutions and markets went for a tailspin on Monday. The things cooled down towards the end of the week with interventions on the side of Treasuries and central banks worldwide.
This weekend, US Treasury and Fed are to talk over the longer-term solution to the current problems. The market rallied, for various reasons, at the end of the week and I'm looking forward to see the developments on Monday.
As of right now, there are still no news about some concrete steps. Apparently, the costs in the bad-debt cleanup could be somewhere around US$700 billion. When that is added to the write-offs so far the sum gets about right where the prognosis was for the costs of the current financial crisis. IMF estimates were $1.1 trillion and some economists raised it to $1.4. I think the current number is higher that $600 billion. So, it is about right.

As for the market index movement, the next couple of days is to show whether we have the trend reversal (from bear to bull), just a temporary bull because of short covering and a few good news, or a continued fall down.

The dynamics of the bull-bear cycle

A graph worth remembering.

Shows the dynamics of the bull-bear cycle of the markets.

Price Pulse

Here is the price pulse - this is how the market charts generally look. The bull phase develops longer than the bear phase.
I'm not sure about the number of these patterns as they can be found all along the actual price chart.

If the C phase of the bear market is to last this much longer than the A phase, then we have a long way to go down in the current market. In that case the phase B could have happened in April this year (2008).

Stock Bubbles and Crashes

Science unveils hidden drivers of stock bubbles and crashes - Yahoo!7 News

I'm just reading Forecasting Financial Markets where the main theme of the book is group behavior and how people as members of groups behave
differently to people as individuals. There are reinforcement cycles
and other elements that have nothing to do with the underlying idea,
once a group spins off. Applied to the market this means that booms and
busts don't have much to do with the underlying value of stocks.
Don't
know if that is comforting but will definitively be more investigated
into after this current crash. Now even the healthy institutions are at
risk of falling down because of business depending on ratings depending
on the stock price depending on emotions of stockholders.
Nonetheless,
yesterday was a good time to buy when the S&P 200 in Australia hit
4500. Macquarie was down but quite healthy. That is visible as the
orders came in today and the price is back up 55%.

Market Movements

It's interesting looking at the earthquake in the markets. Since this is my first time actively following the markets (this year, actually), it is amazing to watch news changing from hour to hour. I can only imagine how boring it was in the past years when there was not much going on. The market had it's returns and people were to put money in it and wait. It is not too different today, right, but at least there's some adrenaline pumping and emotions arising seeing one's life savings dropping down 30% and then coming back up, then down, then up, and so on. Those assets represent people's hopes and dreams, their life goals, houses to live in, cars to drive kids to school (actually, I'd prefer my kids walk to school the way I did, but...) etc. So, one day those dreams are pushed into the distant future as the amount saved reduces. The goals seem unreachable again. The life is to last in a prolonged suffering and selling one's knowledge, effort, energy, life for money that is to be exchanged for the things one needs and wants. The other days, indexes shoot up, and all those goals are so much closer again. That is fun. :)

Anyway... The markets are up about 3% overnight. There might be some institutional solving of the current crisis, which would be good for the future. Also, short selling might be limited, which would also be a good thing.

Average Monthly Gain - Dow

Here's a chart that may put things into perspective. September has been the worst performing month on Dow for a long time. This year fits the bill perfectly.

US Industrials Chart

Flickr Photo Download: djiaa supercycle 08-30-08

Here's a link to Dow Jones Industrials for the past 100 years. A very interesting historical piece in light of the current events.

4500

Heh, I seriously believe the real bottom is around 4700. But, again, the market hit 4500 overnight and it's still in that range. Apparently there is panic among the investors.

Looking at the S&P 500 graph...



feels like there is room to sink deeper, much deeper. I've heard statements that this is the worst financial crisis in 30 years. These are interesting times, what can I say. :)
But I'm still an optimist. Invest what you can afford. Everything will be alright in the long term (as we will be dead by then). :P

Predictions

Predictions are not a good thing to throw at someone. Generally, my predictions have been wrong. In fact, sometimes wrong - sometimes right. Just like anybody else's. And, throwing predictions that don't cost a thing are particularly easy.
In my efforts to understand markets, psychology of investing, and other related events I will start to write down my thoughts in relation to certain events.
So, I'm going to give a prediction right now. The bull market has already started today afternoon. While this is a heavy thing to say, I'm looking forward to see whether the prediction is right or wrong.
Despite Lehman crash, I'd say that event marked the end of the credit crisis era. Not that it is completely over but that was the last bang. I'd expect puffs here and there but generally that should be it. A bottom of 4700 was reached yesterday.
Unless something catastrophic happens, the other news are pretty good at the moment. Aussie dollar is cheap, commodities are cheap, gold is cheap, oil is cheap, stocks are cheap. Everything's on sale at the moment. It's about time people start buying.
Let's see what happens in the next few days.

LICs in Australia

Listed Investment Companies

Argo
Milton
Choiseul
Australian Foundation
Djerriwah

The problem with these is that one can be a shareholder only as long as she has an Australian address. Being outside Australia makes it to complicated in terms of legislation. Hence, not very interesting option. :(

Market Heading South

So... Markets are heading down again. Testing the statement from a few days ago how it was ideal time to buy. It is one thing to state that after the index is shooting up and another when it is coming back down. Anyway, I think it's a good time to buy for a long-term investors.
So far, I've only seen modest returns from fund investments. Those would, for sure, be matched by interest returns on savings accounts in Australia. Though, now the rates are lower and that comparison will soon not hold ground. Meaning that even in a falling market (or bear market) the income is still superior to savings accounts. The prices should come back sooner or later, then justifying the investments. I'm talking of long-term investments here, not short-term manipulative trading. The goal is to create a modest income stream to support the low earnings and retirement (even lower). :) So, looking at the index coming down again I expect this is confirming the bottom. Of course, there is always a possibility of it going lower still.

Energy, Aus

Good opportunities come and go. At the end of the last week we could see the energy sector dropping significantly for whatever reasons. On Friday the prices were 30% lower than only 10 days earlier. This was an excellent opportunity to buy into the shares/funds that have great dividends. I'm so sorry I could not get a piece of action as, coming back from holidays, I did not have any funds ready to invest. Even a small amount would help a great deal as the last time I bought into the energy sector the prices were 30% higher. This would have averaged the investment making me feel less bad about that decision. :)
Today, the energy sector is 8% up already. I reckon this will be a fast return. There are views that this is the end of the credit crunch and the current crisis. The long-term average is very close to the current levels and I reckon it will take another week to equalize. This will technically mean we are moving from phase 4 into phase 1, the start of the bull market. This might be a bit too soon but that's better than a bit too late. :)
Happy investing.

Wonderful Market

The Australian index finally started moving up. Nothing major happened during my vacation time.
Glad to see the index going up. Makes my vacation costs almost disappear with each point upwards. :)

From what I can see, more and more people are saying that the worst is over. Volatility is to remain for a few months in the future but this could be the start of an upwards trend. I can still remember the misery in the news on July 15, the bottom of the market. Brrr, don't even want to think about that.
My unpaid leave will have an effect on this month's investments so I'm to see what is the best thing to invest with the next month's piece of the salary.
Glad to see the oil around $100 again. Not that it will stay that way for a long time, of course. The markets are interconnected and cyclical.
We see that the slowing economy has an effect on energy and materials consumption which, in turn, lowers their prices which, again, pushes the economy up again.
Too bad that the Aussie Dollar fell so much during August. The need for A$ fell because of lower need for resources. That had a negative effect on my foreign currency spending abroad.
On the other hand, Wizard MasterCard has proven quite beneficial and I'm it's happy user now.