ZAY Blog

The S&P Futures were up yesterday, but closed lower at the end of the day. So it is giving another try today to see if the market could reverse its downward trend and start a bear rally.

However, while the market surged this morning, the ADP payroll reduction report has definitely hit the market hard, with almost a straight decline in the first one hour of trading.

This shows the market is still very sensitive to any news that may offer a gloomy outlook of the current crisis.

Unfortunately, the reality is, the crisis does not seems to come to an end very soon.

Be very cautious in the current market seems to be an advise that everyone is getting, and something that I would definitely agree with. It is difficult to tell when would the decline be stopped, nor when would the market start to recover.

In a very short term though, I do see a likely bounce back from the current lows.

The market is likely to take a break as the reporting of Q4 financials quiet down, and be ready for another round of reports coming up for Q1 2009, which will start as early as May.

Meanwhile, governments are likely to make use of the short gap of time that they have to boost the confidence a little, by offering some even more promising pictures.

One thing not to be ignored, though, is that GM and the other automakers are running out of time in submit a viable plan to continue their survival. If they are unable to somehow prove themselves could remain alive, the market may face yet another huge blow.

Until then, I would hope for the bulls, but in a very cautious manner.

I am not sure how many short-term traders were fooled by the market today, but I confess I am one of them, and paid a pretty hefty price for it.

All was set to rise this morning, when the market initially opened. After all, we’ve had some pretty positive news from the Federal Reserve regarding the bank nationalization process, and the momentum from the spike yesterday seems to remain.

Things start to be ugly after about one and a half hour after the market opened, and after almost everyone was thinking that S&P was well on it’s way to 790, if not even test the 800 points level.

Within an hour, the S&P gave up all its gains for the day and finally fell to red two hours later.

Most of the major financial news attribute such a day to the decline in the health sector, which is, most of the time,perhaps one of the most insignificant and stable sector in the S&P index.

However, to me, that is just the market taking back some of the over-zealous buying activities after a day of insanity.

The evidence that the market could no long sustain its gains was pretty evident in the last half an hour of trading on Wednesday, with a 15 points drop.

Unfortunately, the market was still largely in the mood of celebration and S&P futures were traded higher even up to the minute before the market  opened today.

However, for those who were taking a long position today, there is really not a lot to worry about, the market is likely to regain some of the losses today, although without any good news, the chances of hit 800 tomorrow is not quite likely.

For the next couple of days, expect some huge volatility like what happened today. At least till the market start to find a new direction, stay put if you do not want to take huge risk, or keep a close eye to your tick charts if you want to minimize your loss.

I was literally watched with fear and frustration today as S&P slide down below 750 in the afternoon, and dropped 1% in the final hour of trading.

The last time S&P went this low was in 1997, almost 12 years ago, during Asian financial crisis.

What was really scary to me, this time, is that the market is not reacting based on any news.

In fact, there was news that US government was considering purchase some of the shares of Citigroup, which resulted in a 20% rise in C today.

Not so long ago, Obama just signed the stimulus package into law.

Even before the market was opened today, I bet some institutional investors did not see such a bad day. After all, the S&P futures were going up in the Asian market, and the Dow Jones index went up by more than 70 points in the first half an hour.

This is an indicator that rather than selling out of panic, investors are actually losing confidence on the government in solving the current problems, which means unlike what happened last November, when huge selling pressure built up after the collapse of Lehman Brothers, and quickly disappeared after the US Congress announced the bailout plan for the automakers, the current downward trend may persist for a while.

Furthermore, earlier today, the market was still trying to stay above the support level, only to loss that late in the afternoon with large trading volume. This is usually a sign that the downward trend will continue further.

The next couple of days will be crucial in determining the fate of the stock market for at least the next year or so. If the market continued to slump, there is a reason to believe that we may still be far from the bottom, and be even further from the recovery point.

Until then, I would hold on to cash positions and sit tight.