Monday, September 17, 2007

STI dropped 60 pts to close at 3476, ahead of FED meeting

Woah...STI dropped 60 pts to close at 3476, representing a percentage drop of 1.70% with a volume of 2 billion. Knew something isn't right with the way STI climbed end of last week, with lots of breakout failing.

Theme of the week? FED rate. Rumors are flying here and there about 3 scenarios:
1. FED keep interest rate unchanged
2. FED drops interest rate by 25 basis pts
3. FED drops interest rate by 50 basis pts

Scenario 1 would see a temporary global selldown because from what I think, we've already assumed FED to cut rate by 25 basis points. If they didn't, we would lose all the gains we've made last week and perhaps more. Let's really hope that didn't happen.

Scenario 2 - where FED drops rate by 25 basis points - is market expectation. If it happens, it's neutral on the stock market. Shortist might short the market - sell on news. Longist better don't buy, because might be buying on high, might get trapped.

Scenario 3 - beyond market expectation. This might just be the catalyst to trigger the last wave of this super bull run before we sink into oblivion (haha, sorry for being so pessimistic). Some say that the last leg of the bull run is the strongest and I believe so. Like day and night, the darkest hours of the night herald the coming of the brightest. In this case, the after the brightest time of the day, it would signal the coming of the darkest time of the night. Yin and yang, bull and bear, all natural cycles.

Quite a number of stocks went down - and hard - erasing most of last week's gain if not all. Construction seem to be hit harder than most i've seen. Really, still no new news about contracts? Haha, how can speculative stocks run without the speculation? I don't think tmr is a big cheer day for STI too. At most we'll be trending sideways, the worst we'll still be dropping. That's because 3500 broke without much effort - chey, I thought 3500 is our new support level. Maybe it's just the circumstances - with 2 days before the FED rate meeting, nobody dares to pick up fallen angels.

Over the weekend, I read some really scary news about bank runs in UK. Bank runs means that a lot of retailers withdrew their cash from their accounts in fear of the bank going bankrupt. If the bank does not have sufficient liquidity to provide this massive withdrawals, it'll go bankrupt and cause even more withdrawals elsewhere. Banks would fall like dominoes one after another because banks also borrow from one another. Credit and trust - the world is lacking in these nowadays.

Dow dropping now, it's -47 now. Europe tanking down, around more than 1% drop on average. Looks like I might have to wait a little longer to break even again. Oh well :P