Smart Investing/Trading for the week ending October 10 2008

Weekly US markets Update and Outlook

U.S. stocks seek relief from G7
Dow's sees worst weekly drop on record; earnings reports on tap

MarketWatch: U.S. stocks will enter next week with investors either comforted or disappointed by the meeting of the Group of Seven finance ministers and central bankers, who have gathered in Washington D.C. to address the global financial meltdown and its implications for the world's economies. "I don't know what the G7 can do exactly," said Robert Pavlik, investment strategist at Oaktree Asset Management. "But if they can come out with a positive statement, after all this is a gathering of some of the most qualified people out there, then that will help market psychology." Several hours after the close of trading Friday, G7 ministers and central bank governors pledged to work together to make sure that large important financial institutions do not fail. In a brief "plan of action" released after their meeting, the G7 said that the current market turmoil calls for exceptional action

MarketWatch Editor in Chief Dave Callaway takes a look back at an awful week for U.S. equities, and a look ahead at what may lie in store for investors. At the top of the list were unfreezing credit and money markets, ensuring banks can raise capital from the private sector, ensuring that deposit insurance regimes were robust, and repairing secondary mortgage markets where appropriate.

Also after the G7 statement, Treasury Secretary Henry Paulson gave some new details of the emerging plans by the federal government to inject capital directly into a "broad array" of financial firms. That still may fall short of the wishes of some market veterans such as Ed Yardeni, president of Yardeni Research, whose dream scenario included central banks setting up a facility to intermediate the nearly frozen inter-bank funding market. But ahead of the G7 statement, Yardeni also expressed hope that the market's meltdown was nearly over. "Of course, no one can tell how much longer or how much worse the panic selloff will be," Yardeni wrote in a note. "The best case scenario is that the capitulation and revulsion phase of this extraordinary global bear market [climaxed Friday]."

Market meltdown

With bank-to-bank lending and credit markets virtually frozen, Wall Street joined a global market rout that lasted for eight straight sessions. Over the past week alone, the Dow Jones Industrial Average lost nearly 1,900 points, or 18.2%, its worst weekly drop on record. With Asian markets tumbling Thursday night, the Dow fell nearly 700 points upon Friday's open to trade below the 8,000 market for the first time in more than five years. Banks have a golden opportunity with earnings to get everything off their balance sheets, says Russ Koesterich of Barclays Global Investors. He says write-downs could have a long way to go. But in extraordinarily volatile conditions that saw the blue-chip average swing back and forth by more than 500 points, the Dow settled down only 128 points at 8,451. The S&P 500 index finished down 10 points at 899, while the technology-heavy Nasdaq Composite managed to eke out some gains, ending up 4 points at 1,649. The weekly tallies still tell the tale. The Nasdaq fell 15.2%, its fourth worst weekly loss on record, while the broad S&P 500 index also lost 18.2%, its worst weekly drop since 1933.

For the year so far, the S&P 500 has fallen 38.8%, its worst weekly decline since 1937. Several analysts were encouraged by Friday's rebounding action and said that the market may have reached capitulation, when fear and selling reach an apex and a low is made which allows the market to rebound. "I'm more convinced now than ever that this market has made a bottom. The capitulation came when we breached 8,000," said Peter Cardillo, chief market economist at Avalon Partners. "It doesn't mean we can't go back and revisit that level."

Oil slides

In an ominous sign that investors expect a global recession, crude oil prices plunged 17% on the week, to finish at a more than one-year low below $78 a barrel. While the action could bring relief to consumers and businesses, the cause of the drop for now seemed more ominous than its implications. Not every market analysts was convinced that Friday's action would signal a rebound. "There's a little bit of buying going on," said Paul Nolte, director of investments at Hinsdale Associates. "But is it over? We won't know for a couple of months," he said. "The market is cheap if you look over 5 years, the problem who knows what will happen next week. There's nothing to say this market is not going to get much cheaper."

Many analysts say that among their biggest concern remains frozen credit and interbank lending, which have prevented everything from small firms to large institutions from conducting their business. While the cost of borrowing dollars overnight fell Friday, a key three-month rate continued to rise amid chronic tightness in global money markets. The London interbank offered rate, or Libor, for overnight dollar loans tumbled to 2.46875% from 5.09375% Thursday. But three-month dollar Libor rose to 4.81875% from 4.75% on Thursday. "It's about the banks becoming more confident and bringing Libor down," said Oaktree's Pavlik.

Earnings

As U.S. investors still try to gauge how deep an economic recession at home and abroad might be, they will look out for any outlooks from key companies reporting quarterly results next week.


Weekly KLSE CI Technical Update and Outlook

ICapital: The KLSE CI is below its 30-day, 50-day and 50-week moving averages. Both its daily MACD and DMI are bearish. On the monthly KLSE CI, the broad-market sell off has caused the KLCI to hit its initial support level and the stochastic oscillator is also severely oversold. Despite the MACD crossing into the negative area, the DMI is diverging, which is a technical sign that the downtrend is getting stronger. I Capital sees the crucial support at its 50% retracement target of 900 points. However, would the announcement by Pak Lah that he is giving up his premiership be able to prevent the KL stock market from suffering a sharp setback?

* behind every move, there is always someone behind it working, lobbying, proposing etc. Here is an example......refer here

* Will tomorrow be just another day at work? Parliament reconvenes tomorrow...will there be any roadblocks in the morning?