It is a 'Black Week'

We’ve heard of Black Friday, Black Monday… Black Thursday. Sum it all and we have a ‘Black Week’.

The Europe and US markets continued its downtrend yesterday. The latest trigger adding to insult is about the fears of the French banking’s sector exposure spilling over to US banks.

From my last post, I mentioned that the timing is ‘almost’ ripe to reap and take advantage when fear and capitulation takes centre stage. However, with this new event the harvest is delayed as the financial climate takes another turn.

The relief rally we saw on Tuesday in the US and following Asia on Wednesday is not considered a ‘bull trap’. I hope the following clarifies. We have known all along that global growth is a concern. It had been there for at least 1-2 months prior to Black Friday. However, there wasn’t a trigger.

Subsequently, the trigger that ‘woke up’ the bears were the weak US GDP figures (Q1 AND Q2) and global weak Manufacturing data which followed. I believe the US debt ceiling and S&P credit rating was ‘played well’ into camouflaging the weak economic data. The euphoric rally when the US meets its deadline on August 2^nd was obviously the last bull trap.

What the Fed unleashed ‘with low rates until mid 2013’ had NOTHING to do with resolving the concerns that triggered the downfall of the current global concerns. Hence, I interpreted the move as just a breather before high yielding assets continue its journey South.

With an hour to go before US close, I strongly believe that we will not see a repetition of US market rallying 600 points to close higher BUT I speculate the US markets will close at the lows of the days.

If this suspicion is correct, the Asian markets will open with weak sentiments and continue the downtrend.

I suggest we wait till Ben Bernanke make his delivery in Jackson Hole later into the month before making any move. Keep an eye on Europe’s banking concerns and further moves from China! In addition, watch the safe haven assets like Gold, JPY, CHF and VIX for further volatility.

Meanwhile, it’s a about time I go for another vacation while the bears fight it out!