blog.thomaspan.com

We had a pretty rough week last week in the stock market thanks to hedge fund subprime credit crunch. Market was scared, obviously, before Federal Reserve Board stepped in last Friday morning. Shorts were largely squeezed so it looks like that the market has recovered. However, given the fact that world central banks acted SO QUICKLY with a promise of more than $300 billion liquidity injection, the credit crunch is far from over. Though a short-term big crash in the stock market has been stopped by the Federal Reserve. At this point, Wall Street traders might not be very happy. Technically speaking, once stock market reaches a new bottom, it will try to retest it before bouncing up. Symmetrically, Dow tried 14000 twice before pulling back to its 200 day moving average last week. Correction is not over yet!

On the other hand, although an ecnonmy crash is seemingly looming around the horizon, there is no strong evidence at all to suggest a crash in either this year or even next year. Here are some numbers to remember. Mutual fund assets have hit $11.39 trillion, compared to $1.7 trillion that hedge funds have. The total mortgage size is around 10 trillion vs. 1.4 trillion from subprime. The nationwide foreclosure rate is still less than 3%. Further, business is slowing down in summer. Consumers intend to spend less since the shopping seaon is just 2-3 months away. For traders, there will be good buying opportunities in the next couple of months before reaching November, or even the end of October.