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Strategies & Market Trends : Waiting for the big Kahuna -- Ignore unavailable to you. Want to Upgrade?

To: GROUND ZERO™ who wrote (74750)	3/2/2007 7:19:36 AM
From: Real Man	Respond to of 94695

2/27 day was very unusual technically - 3% down day has not occurred since 2003. Sure we'll have a rally now, but I kind of wonder if this market is broken. The reason is sea of bad debt. Normally, as stocks decline, long-term bonds rally, so lower interest rates induce housing recovery. However, subprime mortgages are now in huge trouble, so I doubt the rally in bonds (lower 30- and 15- year rates for mortgages) and increased Fed printing (it did increase right after the decline, of course, and there was a large coupon pass this week, the first one since December 06) will produce anything - the bank credit is not getting easier. In fact, the subprime blowup is causing credit tightening. It may be more difficult for the Fed to induce another huge rally to new highs this time, so we may see a failing rally of the (coming) bear market. No doubt all that huge debt has to be cleared or printed somehow, but this could be a long process. That's what bear markets are for. If the dollar hits new lows, yen rallies, and LT rates go up as stocks go down, then we may even have a BK type decline. I don't think current credit conditions can withstand higher rates. I think the Fed will cut soon, it has to. However, that may lead to Yen rally, dollar drop, and LT rates INCREASE, because of the carry trade reversal.