每日市場點評 --- November 9, 2007

What a well-planned trap bears prepared for bulls! For those people that thought yesterday was the capitulation day, they should have realized they were wrong before the market open this morning. Pretty much all news this morning was negative. Again, the news was mainly focused on the banking sector. Not surprisingly, the market opened sharply lower and continued to trade lower until 11am when Dow was down by almost 250 points. Then short-covering activities pushed the beaten down financial sector and homebuilding sector sharply higher and at around 3pm Dow was off 200 points from its low. Just when some people think we may finally get a “real” capitulation day, the market showed its hand during the final 30 minutes of the session and pushed all three major indexes back to their lowest level of the day. In short, bulls were really disappointed today.

There are a couple of things I’m watching right now to predict whether we have reached the bottom (of course this is based on my current judgement that what we have right now is a correction in the bull market not the start of a bear market). First, we need a day that the market is selling big in heavy volume then being pushed higher with even heavier volume. Ideally, we should get most sectors joining the rally; Second, we need to have a higher VIX level, say somewhere above 35 to indicate most weak hands have sold their positions already; third, we need yen unwinding trading activity to slow down and this is something that didn’t happen today even after Dow rallying for 200 points. As long as the Yen unwinding is going on, traders will be forced to sell risky assets so it means more drop for equities.

So now the question becomes will we get such a time next week? All I can say at this point is maybe. And in the meantime, a hedged position or simply holding cash may not be a bad idea after all.