Tuesday, 29 September 2009

October Market Correction due?

I was very convinced the markets were not going to rally through September and October; although some of the information coming out was good enough to mean there should be no repeat of the crash of 2008.

However, here we are 29th September and the rally has continued. From 4819 on September 1st to 5150 today.

I received an email this morning warning that the Elliot Wave analysts are predicting that this is really still a huge bear market rally ready to come crashing back down again. I am not so sure about that, but there is huge risk in the market going up with no corrections when the economic situation is so poor.

One bright light for shares is the collapse of the Pound Sterling. The pound is down over 10% this month, which tracks the rally up - so in global terms the FTSE is going sideways. Perhaps the current devaluation trend will continue to push money into shares.

Now though I have withdrawn some money from the markets and am looking into safer havens for it. Euro Bonds are featuring high on this list if I can find an easy and liquid way to invest.

18 comments:

roym said...

do you mean govt or corporate euro bonds?

getting a bit anxious as practically too many mutual funds that im in feature bp, shell, vodafone et al!

Steven_L said...

Investec Emerging Market Debt fund is a good waty ot get out of sterling and into a mixed basket of currencies.

Richard Elliot said...

I can't decide if the FTSE is in for a drop or not. I think QE is propping it up.

With GBP so weak are non-GBP funds (of almost any description) good value?

Budgie said...

Last year people rapidly became fearful, irrespective of what others were thinking. This year people seem to be fearful that others may be fearful. There is a difference.

Anonymous said...

Concur.

Due a correction, but "how big" is the question.

Window dressing yesterday, and possibly today in the US, for Q3 results. Then, get out of the way.

Targets for retracement set later, after observation.

CityUnslicker said...

ROYM - yes, funds can be tricky like that as I have found to my cost. I mean Govt bonds, had a lovely ride with money in a pan european corporate bond, but it looks too toppy now and I sold yesterday.

SL - Hmm, won't that be taken out in another correction too?

RE - Of course QE is doing this, but a correction does not mean a collapse. The big collpase WILL happen when QE ends.

Budgie - I don't expect it to be like last year at all; but still don;t think the FTSE will end the year over 5000.

Anon - Agree, can't see where the levels are yet, but he day of correction is eeking closer.

Blue Eyes said...

I'm getting out of cash and spending it on nice things while it's still worth something. I'll repay my mortgage in devalued pounds after the real collapse.

QE is going to end in tears. It can't end any other way.

CityUnslicker said...

BE - never pay back a mortgage, never has made sense to do anything other than interest only, never will.

electro-kevin said...

Care to enlarge on that, CU ?

Blue Eyes said...

I'm guessing CU is alluding to the UK's perpetual monetary erosion and house-price inflation meaning you should only ever pay back the mortgage when you sell because the money will be cheaper at the end of the period.

With QE likely to give us a horrific spurt of inflation that makes sense to me! But then that leaves me wondering what the best thing to do with my small savings is to stop them from being wiped out.

Mark Wadsworth said...

Or put it another way, the FTSE is always lower at the end of a period of Labour government than at the start, so 3,700 here we come ...

Steven_L said...

"Hmm, won't that be taken out in another correction too?" (CU)

A correction of what? Foreign government bond prices? Perhaps, just depends how bearish you are on sterling I guess. If you think sterling will fall another 20% but also think a stock market fall is on the horizon I'd say it's a good place to be. South Africa and Malaysia will more than likely keep paying their coupons.

I'm not going anywhere near it, although I nearly did a couple of months back and wish I had now, would have made about 8% in 2 months.

I'm trying to make back my cfd losses long WTI crude now though. So I'm hoping Iran will launch a few more rockets, or Obamarama will annouce some kind of new 'stimulus' or something.

Bill said...

One interesting facet of Labour misrule has/had been the rubbish stock market performance at the same time as we were being told the economy was on a rock and roll. I agree the current bounce is (largely) due to QE but also wonder if it isn't also discounting a return of Tory government and (hoped for) fiscal and monetary repsonsibility.

What really stinks is that financially conservative people have been stuffed both ways by Labour. On the way up a dodgy measure of inflation helped pump up asset prices and lower risk "free" yields. Now QE presents us with a devalued currency and the prospect of vicious inflation. God help us.

CityUnslicker said...

EK - What BE said. say you take out a £200k mortgage today, will be much cheaper than renting even at 90% Loan to value. yet in 25 years £ is likely to have fallen well over 100% in real value (average salary 1984 - £11k vs today £24k).

So pay it back at the end or sell the property then when it will likely be worth between 3x and 10x what you paid.

All the interest you pay is still ess than rent. The way our system is geared, renting is stupid for any real length of time as is paying back bank capital.

personally I overborrow and aim to beat the bank rate on investments.

CityUnslicker said...

SL - Long OIl WTi is a poor tracker. Have you looked AST.L or HOIL?

Both massive buys at the moment regardless of market sentiment.

Steven_L said...

I'm long the October contract on my cfd account, which I believed the price was derived directly from the October futures contract trading on wherever it trades?

Have I been had?

Steven_L said...

And no way is buying cheaper than renting. I pay £340 a month including gas, ele, water, councuil tax, broadband, Sky TV and a couple of drinking/fishing buddies.

CityUnslicker said...

SL - Ok, that is a fair point re renting, but when you have a family and have to rent it is a different matter.