Santa Claus Rally?
After I have published my blog last week on “chart-wise”, interestingly the global stock markets from US to rest of world have started to rebound in anticipation of another interest rate cut by the US Fed. In fact, most charts including the Dow and Nasdaq indices have managed to rise above their respective 200-day MA. In addition, the Baltic Dry Index also rose in tandem in the past few days. Whether these global stock indices will continue to rebound remains to be seen.
Have we seen the worst of the sub-prime loans debacle already? A quick glance on the chart of 10-year Treasury Note below shows that investors are still jittery as they bid up its price (so that the yield is falling). This is typical of “flight to safety”. In my opinion, the pre-condition for a rally is the stabilization of this chart
In short, stock markets will still be volatile looking forward. Once again, stock investors are looking at US Fed for rescue. Indeed, almost everyone is waiting for Fed’s rescue this time. This includes the borrowers, lenders as well as the investors. All eyes will be on FOMC on 11 Dec 2007.
Should the US Fed decide to cut the interest rates on its coming FOMC meeting, the markets are likely to take off from there and we could possibly still have the Santa Claus rally. In fact, the next few days are critical to decide the trend of the stock markets for rest of the year. Will the dip in November just like those in June 2006, Mar 2007 and Aug 2007 where the stocks subsequently rebounded and moved higher? If you take a look at the charts, one interesting find is that from June 2006 to the next major correction, i.e. Mar 2007, it takes about 8 months and about 5 months to the next major correction in Aug 2007 and another 3 months in November 2007. Hey, these are the Fibonacci series (1,1,2,3,5,8,13,21,….) in reverse order! Does this mean that the next major correction is around end Jan or early Feb of 2008 (right after the Chinese New Year)? Well, this is just an interesting observation, we still need to do the usual, i.e. monitor the macro picture, monitor the trends etc. All said and done, I am still hopeful for a mini rally in December and possibly extend into Jan next year!
Cheers!
Master “The Essence of Stock Investment” and ride towards the journey of your financial freedom to be the “Master of Your Own Destiny”!
Disclaimer: Investors are investing at your own risk. Please read full disclaimer at the end of the blog or from the main page of the website.
1 comment December 4th, 2007 NW Teong
