Tues. Mar. 13, 2007

Terrible Tuesday, what more can I say. You guys could have made great profits if you had heeded my warnings from Saturdays blog. Enough of patting myself on the back. The reason I feel the need to update is we have really entered new territory here. Our markets are now Down about 5% and headed towards that benchmark figure of a 10% correction. The fundamentals are beginning to get scary, hence the Shadowtrader's Fear Factor is being Raised to an 8, based upon confirmation in today's news of some of the highest ever foreclosures, the sharp rally in Treasurys, UP almost a half point and the rally in the VIX, UP 30% to 18. Happy Trading Ride the shorts for big winners.
More Confirmation comes from Marketwatch.com:
The recent market sell-off is not over, but about halfway done, Zandi said. There's a 50% probability that it'll be a modest correction, which will not dissolve into a major economic crisis.
Moody's estimates there's a 20% probability of a more severe correction, with U.S. stocks declining 15% and credit spreads expanding by 150 basis points. That scenario would trigger some easing by the Federal Reserve, but it wouldn't lead to a recession.
There's a 20% probability of yet another, much darker scenario, which will see U.S. stocks declining more than 20% and credit spreads widening more than 200 basis points. In that scenario, a recession in the U.S. is likely.
Moody's least probable scenario -- with 10% probability -- is that the correction is already over, but there are higher odds of a more substantial correction later on.
A global markets sell-off -- ranging from U.S. and European stocks and fixed-income to commodities and emerging markets -- was triggered by an 8.8% drop of the Shanghai Composite Index in China last Tuesday.
"It's clear that this is a global event, across all markets, across all asset classes, but so far it hasn't been very deep," Zandi said.
Last week's biggest loser in dollar terms was the Russian stock market, which fell 9.8%, followed by Brazil (down 9%), China (down 6.2%), Germany (6.2%), India (5.8%), as well as Canada, the United Kingdom, the United States, and Japan.