Z.O: While you have been keeping tabs on Q2 earnings, I have been researching the markets as an entity. Generally the direction of the Financial Index points to where the DOW is headed.This Index has now lost near 20% and is currently still headed south. If this decline extends into Oct. it will signal a traditional bear mkt. In such markets, predictions based on past valuations such as P/E's become redundant.
Price drops in such markets are quite large. Based on past Bears, the levels to which the S&P can drop is as follows:
a: Like 87 crash : 750
b: Like 73-74 Bear : 580
c: Like Nikei Bear : 420
d: Like 29 Crash : 120
I do not think the Fed will allow the S&P to drop below 750. At that level, he is likely to cut interest rates to support the market and prevent a world recession. If we accept the floor at 750, then it is
more than likely that we will see us first making a double bottom i.e a retest of the low reached on Monday. If the Bank Index continues its
fear slide, that test should come earlier than later. Once the test is made and it holds up with a strong rebound together with the Bank Index, I would say that we can forget the general scenario and then concentrate on NN in isolation. In brief,our main concern for the near term should be the Bank Index and not NN.
I do believe that the media is being used to promote fear and liquidity on concerns of heavy trading losses and loss of income due to the so called collapse of Capital markets. In reality, the losses are small in relation to assets. As an example BAC had a trading loss in Russia of $200m. This amounts to a reduction of 14c from its $1.25 quarterly earnings and assets of over $45b. Yet BAC got creamed 30% of its top.
Whilst Networking news influences the price movements of NN, that price is multiplexed on a main Market wave. If the main carrier wave has a negative amplitude, it can take NN lower. As we are now nearing a main wave nodal point, I hope others will join in discussing its influence. |
