Central banks all around started injecting funds into financial markets in response to ease credit crunch. This sort of sets off alarms in my head. They didn't act when Bear Sterns went down. However, when BNP's suspension of 2 funds came to light, global markets sell off. It was long thought that the subprime bad loans will not affect the economy until BNP's stunner. Now the world is afraid that the worst fear may be confirmed. My thoughts were, if BNP Paribas can be affected and central banks are acting, there could be more nasty surprises coming.
Isn't financial market interesting? When markets are soaring high, everyone is worried about the bubble in China. But guess what? Uncle Dow was the culprit that punctured the bull run. While I managed to side step the bears by liquidating my whole portfolio when I first detect signs of troubles using Technical Analysis, I am still caught by my initial positions to rebuild my portfolio. I went back into the market too early. If not for the pocketing of profits by liquidating my portfolio , surely i would have commited the sin i was so good at..... turning profits into losses. I would need to reassess my views on where the market is likely to head and then act accordingly. The immediate option is to short the index futures to hedge. However this may not be a wise thing to do .....yet
All along my view is to turn short at rebounds, so far, I didn't see any sustained rebound and hence have not acted. What's more, with Central Banks and Feds reacting very swiftly to support the financial markets, my short positions have to be timed to near perfection or I risk being caught flat footed. Anticipations of Fed cutting rate in an emergency meeting before September's policy meeting are reported in the market place. If this is true, it will set off a rally in stocks and to me, that will be the best chance to turn long and then get out of the stocks i am holding. Because my anticipations is, interest rate cut may not arrest the problem, it merely slowed down the problem and worse of all, lower interest rate might lead to another new problem. Indeed, financial market has a self correcting mechanism running....
DISCLAIMER: This is not an inducement to buy or sell. You should do your own analysis on top of my postings.
