BEAR Market

Pick up the The Edge Financial Daily today:
Front page: QE3 only a short term response
3rd page : Investor advised to wait and see
page 13th: Global slowdown silences Asia inflations hawks
page 16th : Uncertainty in global economy
page 17th : HK faces dilemma over peg to US dollar
page 17th : Europe's banks face funding problems
last page: Bursa likely to be bearish this week

Just reading the title, i guess it put you off already. If you are like me scanning through financial papers everyday, it is not difficult to sense the overall market sentiment in the coming weeks. Simple rule of thumb, more negative articles about the economy, more likely the sentiment turn soft. Back in 2008, you see negative news looming every morning you pick the news. Also please observe the movement of bad news in which page of the papers. From the above examples, bad news is dominated at the back of the papers probably, tell tale that so unacceptable bad news or next round of crisis in the making. Lets see from today, whether negative topic will start moving to the front pages.

Follow-up from last Thursday Dow, as predicted, Dow drift low resting just on above the lower trend line, so it is critical to see tonight whether this level could be sustained. If Dow break below the flag, it is significant that market down trend will continue. As the saying that market reaction is two quarters ahead real economy, we should expect some good real value-deal to emerge in 2012. USD negative growth could kick in as early as Q12012 assuming market first kicked in downturn happened in Q32011.

Observe the chart above. A down trend followed by a flag formation happened axactly one year ago. Down trend started in May 2010 and the flag was formed in the next two to three months. Market suprised everyone, moved higher instead of lower. Thanks to the the 2 QEs initiated by the FED. But this time round, will market be lucky for the second time? I guess you have asked whether the QEs has done any fundamental changes to world trade balance ie the West has to spend less while the East need to spend more. If the equation has remained the same, no matters what measures are taken are merely short term boost. So watch out for the higher the market climbed, the more painful of the next fall.