Market Mania

September 15th, 2008  by Antony Ganzitti

Closing Data

Dow Jones down 11 @ 11,421	NASDAQ up 3 @ 2,261	Gold up 19 @ 764.50
Oil up .24 @ 101.19	FTSE up 98 @ 5416	Silver up .24 @  10.795
Copper up 196 @ 7096	Lead up 79 @ 1885	Zinc up 90 @ 1802
Aluminum up 21.5 @ 2583	Nickel up 495 @ 18,925	Tin up 145 @ 19,150

A new twist to the way Market Fox is going to be prepared going forward.  Clients will have the opportunity to hear what individual advisors have to say about stocks, charts, and market briefs.

As the team here at Freeman Fox are made of individuals who have particular areas of interest and expertise, clients will be exposed to commentary by a different advisor on a different day.  While one may focus on the fundamentals of a company or a particular sector, another will give a technical brief and so forth.  This doesn’t mean that we will be confusing clients with conflicting viewpoints.  We will still be guided by the philosophies put in place by Peter Spann, and the numerous meetings and research we use to form an educated investment decision on behalf of our clients.

The weekend brought about a rare emergency trading session in New York on Sunday afternoon, to allow Wall Street dealers to reduce their exposure to a potential bankruptcy filing by Lehman Brothers.  The session beginning at 2pm was expected to last four hours and involved credit, equity, rates, foreign exchange and commodity derivatives.  It is believed the Federal Reserve initiated the special session with the intention to reduce risk associated with a potential bankruptcy.  All trades are contingent on a bankruptcy filing at or before 11:59pm New York time Sunday, and if there is no filing, the trades will cease to exist.

British investment house, Barclays Plc was expected to be the frontrunner to take over Lehman however pulled out of the bidding early Sunday afternoon.  Bank of America which was also touted as a potential suitor has now changed its mind, and instead is mulling over a possible merger or acquisition of Merrill Lynch, a union which would rival the scale of Citigroup.  US markets are expected to remain turbulent, as with each week that passes it seems to be another major drama coming out of the woodwork. 

The Federal Reserve also meets again this week to discuss monetary policy, but the talking point is likely to be the financial sector yet again, as quarterly reports from big name financial institutions Goldman Sachs, Morgan Stanley and Lehman Brothers are scheduled.  Other important data out later in the week is housing starts and CPI price data.

As the technicians noted from the price action we saw both on our local index and American markets on the 2nd September warning traders about the rejection of previous resistance, we are now almost 300 points lower on the XJO/ASX200 index.  We are not out of the woods as September is typically a tough month, and no price action (not even the news of Fannie Mae and Freddie Mac) has come close to justifying anything other than a sideways at best market, which is obviously pressured from the upside. 

The XJO continues to trade in its 3-month range of 5150 to 4800, and until we see bullish activity telling us otherwise, it would not surprise to see the floor of support eventually fail.  This would likely cause stop-loss selling and a potential capitulation which the market may be looking for before it can even attempt a serious bounce.

Well... what does this all mean for portfolio investors.  This is just market noise, but it is important to read into the psychology behind market movements.  As I have been stressing to clients recently, keep your investment strategy simple and use a ‘back to basics’ approach.  Restructure portfolios and focus on quality blue chip issues, and don’t forget to sell that option premium.

1. Back to basics
2. Clean up portfolio
3. Restructure accordingly
4. Focus on Blue Chip heavyweights
5. Diversify accordingly
6. Sell option premium monthly

Breaking news!

The US futures market which opens for trade Sunday night New York time is down 300 points from Friday’s close.  The SP500 and NASDAQ are in a similar situation, both down nearly 3%.

This action will follow through to our local market today, so the 4800 level talked about above is likely to come under pressure.  It’s hard to panic and react to such news, but if you are holding quality stocks and a well diversified portfolio, remain calm!

Clients with margin accounts also may want to check their LVR and margin ratios.  If you are already in a tight situation, contact your broker and look to rebalance the portfolio accordingly.

Contact your Freeman Fox Stockbroker on 07 3031 9960 or 1800 003 369 Ext 7.

< Return to Market Fox home