Can You Spot a Design in Market Madness? - Cartels at Work

Sixth of May 2010. A day I simply cannot seem to erase from my recent memory region. US markets plunged nearly 10% on a single day!!! Dow Jones Industrial Average crashed 1010 points from its day high. New York Times headlines screamed "Stocks Plunge on Concerns Over Greece". Investors on Wall Street are left licking their wounds and the general public sympathizes.

Concerns over Greece? What was so new about concerns over Greece on that particular day that stock prices had to be reduced to few cents and then made to rebound up to 70%  within an hour or so? By the way, financial problems facing Greece was not a new fact uncovered that very day that market players had to sell off in utter shock anything and everything in sight in such tearing hurry. In fact on 17 Dec 2009 I had published a post titled "Debt Laden Dubai - When Will The Woes End?". In that post I had indicated that Greece and Spain were simmering with debt troubles and global investors were worried more on that account than Dubai defaulting. It was common knowledge in global investment circles for the last six months or so that Greece was tottering on a serious financial crisis and would be the first of the European nations to start the Domino Effect. Now would the regulators please explain to US public as to what really happened on 6th May 2010 and who were the extraordinary beneficiaries?

One can understand European markets selling off with one or the other bad news. First from the blocks was Greece with its credit contraction, then Spain bailing out one of its banks and then Germany banning short selling - all that is understood. In between North Korea brandishes its sword on South Korea and China goes on clean up drive to rein in inflation by pulling back some stimulus packages in small measures. Perfectly fine. But what would you say when Financial Times on 26th May tells investors with all authenticity that China was going to sell its reserve of Euro bonds. China holds about $ 630 billion in Euro bonds. That news sent jitters down the spine of global investors.

The shock waves created in Europe from the shattering news in Financial Times was so great that Euro currency nosedived and almost became  serious competitor of Zimbabwean Dollar!! With it the European stocks were dragged down and US exports to Europe presented a great challenge. Pandemonium broke loose in global investment circles. Dow Jones lost 230 points from its day high. Investors were planning their exit strategies further when the very next day China in a surprise move rubbished the news of Financial Times and reiterated its faith in Euro and the European Union. European markets and Euro rebounded with zest and Dow Jones gathered 295 points extra weight.

In all this high drama, one thing stands out very clearly. Influential parties will go to any length and pull off any stunt to browbeat the investors. How can Financial Times, the venerable publication of global markets, be so callous as to publish a news which is so far from the truth? Who are responsible for painting such panic-setting scenarios? Has Financial Times apologized to the investors and to its readers? Will market regulators take some time off their busy schedule and look beneath the cover? Bizarre things are on the cards in global markets. There will be more rude shocks and many more deceptions. Wild swings will tear short term  traders apart on both sides of the trade. Welcome to the Year of Volatility, because cartels are at work with a vengeance.

I will be providing more evidence of big boys of Wall Street who are working in cahoots with other big global players to swindle billions from honest investors. Watch this space for more on this issue of cartelization. Till that time just mull over the news that Wall Street investment banks have engaged lobbying firms for close to $ 450 million to block financial bank reforms in US. You will get to know more about big boys of stock markets and their Machiavellian plans in the sequel to this article. God save US investors!!

Global Equity Markets 2010 - Highly Volatile Mood

Global equity markets have behaved like a yo-yo for the past month. Markets from China to US have all displayed great volatility, which can only be construed as harbinger for future distribution. I say distribution, and not accumulation, because at market high that is what is most expected. This definitely is not good news for die-hard bulls, because such high volatility during distribution is only indicative of very strong down move. As for traders, the present high volatility can be best described as killing, since buying or selling at technical levels is proving counter-productive. Let me bring forth the plight of traders in this highly volatile regime.

A trader enters into a buy trade after confirming with the help of price action that an up-move is in place. A scrip qualifies for buy after it trades above a particular price, prompting the trader to initiate a buy trade. Then suddenly the market reverses gear owing to its volatile characteristics and buy trades turn into losses. Similarly a scrip is considered to have become very weak below a particular price, and so the trader initiates a sell trade. No sooner that is done, there is a strong bullish surge and the sell trades are virtually pulverized.

So what is the solution to the present condition. I am listing a few suggestions for the benefit of traders and investors alike :-

• Investment decisions should be deferred for the time being, specially long term investing. That is because equity markets have yet to touch their intermediate bottom. For Nifty, intermediate bottom could be as low as 4000 while in Dow Jones we can again witness 6400 level soon. If you are a long term investor then wait for levels just discussed above, before jumping into immediate investment.

• Traders should trade strictly along an established short term trend only. And then one should take small profits off the table.

• Wait patiently for correct buy and sell levels for initiating trade, and do not enter into trade in haste.

Year 2010 will be a challenging year for traders as well as investors. So become mentally tough to take the challenges in your stride. My good wishes to all !!