I think that was the real capitulation the markets were looking for in the US. IMHO it's a signal of a short term bottom coming around 11200 or so. (Fingers crossed!) We may have temporarily seen the last big shake out from the big boys as they significantly downsize their risk exposure and perhaps people are covering their gold shorts in anticipation of a short term bounce in the markets from here. One must also think that a horrible jobs report in the US tonight may be factored in to the panic selling overnight.
I hate being bearish and it pains me to have to dish out some harsh truths but despairingly IMO the medium to long term outlook is VERY bleak to put it mildly and I think the markets are starting to wake up to the real problems. We're seeing unprecedented territory in a number of ways.
1. Gold continuing to hit record highs
2. 1 session/30 points away from the worst losing streak on the Dow since 1978. (could very easily have been 10 straight sessions of losses)
3. European markets down about 10% just THIS WEEK. (The CAC & DAX have undergone a technical correction in 4 sessions! Not to mention the Italy 40 DOWN 14% THIS WEEK!)
4. Treasuries yields at all time lows
5. Massive swings in oil prices.
I'd hoped this wouldn't happen till later on in the year but people are slowly beginning to notice the edge of the cliff looming ahead. Bernanke's sailing the ship into the eye of the tsunami hoping it'll peter out as it draws near, but unfortunately it'll swallow him, the US, Europe and ultimately the rest of us into the abyss. Now it may sound like doom and gloom/scare mongering but the reality is THE GREATEST GLOBAL DEPRESSION to dwarf 1929 is on the horizon. Just a matter of time unfortunately folks.
The catalyst could be anything, but it's most likely to be debt related. Problem is we never learnt the lessons from the last crisis we just swept them under the table hoping they'd sort themselves out. The same crooks that have lead the U.S and by default the rest of us, continue to run the show are trying to extinguish the fire by throwing more gasoline on it. No doubt they'll trying! (printing) Bernanke, Paulson, Geithner, Summers, and Blankfein just to name a few are arguably the biggest crooks of our generation. Sadly a monumental meltdown is what it'll take for the system to be completely revamped from scratch and every one of us has to endure the nightmare.
Anyone that think's I'm being overly pessimistic or bearish needs to do a bit of extra reading/viewing that involves more than just perusing the business section of your local newspaper. I'd suggest you take a look/listen at people like Marc Faber, Peter Schiff, Max Keiser and a few others who all in one form or another nail the underlying problems and voice the harsh truths.
As far as investment advice goes. Having a well diversified stock portfolio is now futile. Long term you'll lose, believe me. That's not to say certain stocks won't perform okay but just think to yourself down the track.
-If the US goes up in smoke who's gonna fund that wonder drug?
-If China's bubble bursts who's gonna buy all that African iron ore in 5 years time?
-What value are my banking and transport shares gonna have in a significant downturn?
The place to be for mine is GOLD. Gold has been of value for thousands of years now and for the foreseeable future it will continue to do so. If you're not already invested id suggest waiting for a correction and seeking out an entry point around $1500 if possible. It is also worth holding a parcel of silver and other rare metals as they to will be sought after in desperate times. Also if you can afford it a piece of rural land. If things really do hit the fan which I think they tragically will, you want somewhere to hunker down. If someone waves a magic wand and all our problems disappear at once there'll still be some value in your land. Ensure you've got plenty of cash free as well, so long as it's nowhere near the US Dollar or the Euro!
In difficult times it's the speculators that win and lose big. It could be worthwhile opening a CFD account to hedge against the market/commodities/currency as a whole. However in doing so one needs to do thorough research, tread very carefully and FULLY understand the risks involved.
"All men make mistakes, but only wise men learn from their mistakes." - Winston Churchill
"America makes prodigious mistakes, America has colossal faults, but one thing cannot be denied: America is always on the move. She may be going to Hell, of course, but at least she isn't standing still." - E. E. Cummings
"The markets are like death and taxes, sometime, they're gonna getcha." - Yours truly
(20min delay)