The equity bulls vs the index bears are in a tie as of this week at $22B (each) in total placements. But the bears paid a bit deeper in the money and more confident. If I had to pick a side, I would think another wash this week will finally mark the bottom. It can be another 7-8% lower though similar to April 2005 final sell off when everything appeared to be turning in late March 2005. It is clear that the new lows are not really decreasing, the market structure is quite weak and the central banks did all they could last week to contain the downside (crash), yet the indices are still at the lows...
The Fed has to choose in between (1) the inflation and low growth and more housing deflation vs (2) some deflation and a strong(er) market bottom and better support for the housing. I would think the second scenario funnymentally bodes better for the corporations in 2008 since even if they inflate here, the corporate bottom line will not improve due to the low growth vs high inflation...
If this week finishes flat, I think the market is going to dive sub-1400 next week. If the market manages to stage a substantial rally on Monday, then there will be a huge wealth transfer from the bears to the bulls and it can hang in here for another week maybe before testing the lows one more time. It will be hard to stage a big (sustainable) rally with so much leveraging...
Few charts, the amount of money speculated or used as a hedge is just insane...
- kisa
Edited by kisacik, 11 August 2007 - 04:12 PM.