We are within 300-400 points of a floor
- Thread starter iceman1
- Start date
funny, everytime the market plunges, some see a floor. It is a good floor until the next drop.
You may be right, on the other hand I look at the market right now as somewhat of a Gordian knot. Once the knot is cut, or the credit logjam is released, equities will very quickly reflect that the financial world is not coming to an end. Common sense will return and we will not be 40% down from the highs for long. What it will take? I am not sure but certainly price equilibrium needs to return to the credit side of things so that people can know what is on their and other's books.
If you are a bank right now and can't even value the stuff you have on your own books how can you possibly lend to another entity that is in the same position that you are in. For all you know when price discovery eventually takes place, as it must even with the bailout (perhaps the bailout will be the catalyst and that is why Paulson is talking about using some of it to recapitalize the banks as that is when they will need it), they may go under and it could happen at any time, most likely just when you will probably need all the capital you can get. In a nutshell I think this is at the heart of the crisis, people are terrified of the eventual moment of truth when their assets are priced and they are trying to hoard as much cash as they can so that they can survive it if it is much worse than expected. So bring on price discovery, let everyone know where they stand, and a normal market will resume and likely it will not be as bad as people are currently projecting.
Itâs like someone tells you that they have bad news and you worry and worry and imagine just how bad it can be and then when they tell you you have by then imagined such terrible scenarios that when the actual news comes out it is almost a relief. At least I hope that is the way it will go, the news of losses when price discovery starts again and credit instruments that have been frozen start to trade again I hope and suspect that prices will not be as bad as everyone is anticipating given the selloff we are having. I think the selling is being fueled by banks and funds preparing for the worst and making sure they have cash on hand when they need it (of course the flip side would be that they know what they have and know just how bad it will be so they are selling now so that when they reveal everything and the market crashes for real they have already sold!)
If you are a bank right now and can't even value the stuff you have on your own books how can you possibly lend to another entity that is in the same position that you are in. For all you know when price discovery eventually takes place, as it must even with the bailout (perhaps the bailout will be the catalyst and that is why Paulson is talking about using some of it to recapitalize the banks as that is when they will need it), they may go under and it could happen at any time, most likely just when you will probably need all the capital you can get. In a nutshell I think this is at the heart of the crisis, people are terrified of the eventual moment of truth when their assets are priced and they are trying to hoard as much cash as they can so that they can survive it if it is much worse than expected. So bring on price discovery, let everyone know where they stand, and a normal market will resume and likely it will not be as bad as people are currently projecting.
Itâs like someone tells you that they have bad news and you worry and worry and imagine just how bad it can be and then when they tell you you have by then imagined such terrible scenarios that when the actual news comes out it is almost a relief. At least I hope that is the way it will go, the news of losses when price discovery starts again and credit instruments that have been frozen start to trade again I hope and suspect that prices will not be as bad as everyone is anticipating given the selloff we are having. I think the selling is being fueled by banks and funds preparing for the worst and making sure they have cash on hand when they need it (of course the flip side would be that they know what they have and know just how bad it will be so they are selling now so that when they reveal everything and the market crashes for real they have already sold!)
Agree, the floor will be around 500 in the S&P.
This is my first and only call on a "floor" ! LOL
I nailed oil after not trading for 18 months. I got friends together and we entered puts on indexes and stocks when oil ran into the 135-145 area. I told them we would see 80s again but of course most thought I was crazy. I based my oil call on an experience with a good friend who was a bond trader and way back when he said oil would not likely go much higher than 12-15. He just couldn't see a scenario that would put it higher in the next decade. This was exactly the thoughts and comments we heard when oil was in the mid-120-140s and everyone assumed it would continue higher even in the face of declining demand, a potential recession and an election. No one could see how it could ever fall. Most didn't even consider oil to be a 'bubble'. I did. I got lucky.
The one thing I learned (the hard way) over the past 10-12 years is that all good things come to he or she who waits. If you are patient enough you will always have a great opportunity to make a huge sum of money when we get HUGE and fast moves like we have seen over and over again in the markets. But most need to score every day, every week, every month. That was my mistake as well.
My oil play taught me how to score big in the market, and ironically exert less energy and encounter less stress. First, learn all you can about making money in the financial markets; then get a day job. Then sit back and wait for the next golden 'back-up-the-truck-easy money opportunity. Since they don't come often most don't have the discipline or patience to wait for them, and don't know what to do when they come since they keep looking for the contrary move much like you note by people looking for a bottom all week (and last week) rather than trading the strong downward trend.
Anyone who traded short the past 3 weeks via options or futures (much less the past 9 months) made more than probably 90% of traders or investors made all year long playing games just for the action.
You meant the DOW, i thought you were talking about the S&P.