Morning Note - Panic selling set in - we must be near a bottom!

by James Gerrish 16 March 2011

** 16/03/11  - 8.07am  -  by James Gerrish** 

  • Australian and other regional markets were sold down aggressively yesterdayafter reports that Japan's nuclear threat had increased. 
  • The Human tragedy in Japan is huge and the nuclear element adds significant complexity to any assessment of the current situation. 
 
  • Reuters recently released a great report that outlines the events and the possible implications for economic growth in Japan and Globally - it can be found  HERE
 
  • Yesterday, the S&P/ASX 200 ended the session down -97 points after hitting a low of more than -140 points.
  • Here's a quick video update I gave yesterday - CLICK HERE
  • On our market yesterday, I saw panic which I haven't seen since the depths of the GFC - and that can often be an indication that we are at or near the bottom of the recent pullback.
 
  • Last night, the DOW JONES was down nearly 300 points in early trade (panic selling) before some cooler heads prevailed and the market closed -137 points. At the best of the day it was actually down -80 points. 
  • This was better than our market had priced in yesterday so the local FUTURES are pricing in a slightly higher start to trade matching +7 points higher.
 
  • In Japan, Futures are matching +4% higher this morning after being savaged yesterday - CLICK HERE to see a chart of the Japanese Market.
  
  • The reality at the moment is the market could turn on a dime depending on the news flow coming from Japan -  Any news of explosions or higher readings of radiation will have trigger fingers itchy to sell.
  • Personally, I think the market will bounce however there are so many uncertainties at the moment that I feel it’s a lot safer to bunker down and wait this out.
  • Short term traders are out of the market and longer term investors should hold fire and have cash available to buy into some of these beaten down sectors - A time will come for this!
 
  • We saw further reports out last night that showed the US recovery remained on track - the Fed will continue with QE2 over there and this will to be supportive of asset prices.
  • China and India remain on track - and there has been no data yet to show any slowdown in Global Growth. As the Reuters report highlighted above, past experience shows there is no significant impact to growth from a Natural Disaster - particularly for first world countries such as Japan.
  • We're also likely to see a repatriation of funds back to Japan, and this will put pressure on the USD which could be supportive of commodities.
  • Speaking of commodities, they were all sold down aggressively last night as traders cashed in across the board - gold was even lower overnight. SEE COMMODITY INDEX
James Gerrish 
(02) 9375 0117

Disclaimer

James Gerrish is an Authorised Representative (Rep No. 352904) of Shaw Stockbroking Limited ("Shaw Stockbroking"). Shaw Stockbroking is a holder of Australian Financial Services Licence No 236048. Shaw Stockbroking, its directors, officers, associates and employees each declare that they, from time to time, may hold interests in financial products and/or earn brokerage, commission, fees or other benefits from financial products mentioned in this e-mail or attached documents. Unless specifically stated within this page or an attached document, any information communicated by this e-mail constitutes unsolicited general financial product advice which has been compiled without regard to any investor's individual objectives, financial situation or needs. It is not specific advice for any particular investor. Before making any decision about the information provided, you need to consider the appropriateness of this information having regard to your individual objectives, financial situation and needs and consult your adviser. Any indicative information and assumptions used here are summarised and also may change without notice to you, particularly if based on past performance or relate to a future matter.
 

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