Summary for Week Ending 3rd March 2007
Obviously the most important event of the past week has been the sudden collapse of the worlds stock markets, led by of all things, the Chinese market.
the week started poorly and went worse from that point on. There was no strength evident on Monday, and this has followed the weakness of the past few weeks and the market generally tracking upwards but very slowly. The big thump that occurred on Tuesday has been blamed on the sudden decline in the Chinese market, however its is ALWAYS the US market that leads the way. The saying has always been, the US sneezes and the rest of the world catches a cold. In this case its a matter of the Chinese market sneezing and the rest of the world (including the US) catches SARS. Whilst this may be a unique occurrence it s=does however display how sensitive the western financial markets are to bad news from the East, where an incredible sum of money is being invested and generated.
Looking closer at the point of the Chinese leading the US, its is worth noting that the US market did not recover. Ordinarily when a hiccup occurs, that is in the cold light of day everyone realises that they made a mistake, the market will generally rally strongly and recover the losses. In the current case, this has not happened, and in fact we have seen weakness persist fro the entire week. If the US believes that the decline is an error, this is not being backed up with any evidence, in fact, we are seeing more evidence to the contrary. Also it is worth noting just how fragile the US market is. Sentiment, whilst bullish, is a very hollow kind of bullishness and the dogs are prepared to run and the very first whiff of danger. This psychological state is worth noting and remembering.
In the coming week, we may see some of the decline absorbed, but I wouldn't be counting on anything strong. The aftermath of these events is usually volatile and the sidelines may provide the best vantage point. Also remember the 56 point range has been broken, which is a harbinger of worse to come.
|
