First the overview of the market indices:
| AEX Index | 312,56 | -9,14% | S&P 500 Index | 1056,89 | -3,85% |
| Dow Jones Indus. Avg. | 9955,50 | -3,58% | Nasdaq Composite | 1862,96 | -4,34% |
The AEX index graph is shown for the last 20 years. The current downward spiral is showing signs of ending. This means that once again there is light at the end of the horizon. Have patience and wait for the breakout from the spiral and go for some short term uptrend. This may give rise to a relief rally.
Chances are that if the index recovers to around 347 level(that is a rally of 11% or so) it may begin to climb out of the spiral. Taking lessons from last rally in 2003 this may take us to level of 500 or so.
On the other hand if the head and shoulder pattern has to be completed then the index drop will extend to 217.
Which of these scenarios will play out we will have to wait and watch. For now be careful and keep in mind these two scenarios.
At the end of the day the market did rally gaining more than 5%. This shows that there is still buying power amid the heavy selling . Clear signs that it is an oversold market.
The indications are that value is starting to reemerge. But still market volatility and uncertainity prevails with huge interday swings in indices. Have patience and observe the market moves. the end of bear market is not yet in sight. Panic still persists among search for value.
Factors at play:
1> inflation
2> recession
3> Confidence crisis.
4> Liquidity crisis.
Inflationary pressures of commodity is temporarily in check. this is mainly due to recessionary fears and lack of liquidity for speculation.
Main factors among the above four is lack of confidence. That is a very tricky thing to restore. Money cannot buy confidence. Market fundamentals have to be in place in order to do that.
But that would take some time to come. ....
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