The uncertainty of the outcome of the biggest bailout in history caused so much volatility in all markets. Too much volatility is not welcomed by trend traders. The days of trending market will arrive. Trend traders just have to be patient, after all no position is also a position.

Just one day after breaking down 3.62 support level, Capitaland broke down the next support at 3.40 last Friday. This morning, it further plunged through the psychological barrier of 3.30, traded as low as 3-year low of 3.28 this morning! It is now seriously oversold.

An article by Ann Williams published on Sunday Times dated 21/9/2008 gave a good summary of the 10 reasons for the financial turmoil. The summary:

1. IT BEGAN WITH EASY CREDIT AND A HOUSING BUBBLE
* since mid-90s, easy home loan/credit
* low interest rates
* home prices soared 85% from 1996 to 2006
* bubble created

2. THEN INVESTMENTS GOT TIED TO MORTGAGES
* housing bubble spread to banks through mortgage-linked investment
* Other banks from around the world bought into such mortgage-linked investment

3. MORTGAGES WENT SUB-PRIME
* banks started to make “sub-prime” loans to riskier borrowers, many with no proof of income
* No problem when prices of home were rising
* bubble burst

4. HOUSING BUST LED TO BANK WRITE-DOWNS ANS LOSES
* mortgages defaults and foreclosures shot higher
* values of investment started to fall
* banks started to write down value of mortgage-linked investment

5. AND TURNED INTO A CREDIT CRISIS
* banks desperate to raise fresh capital
* banks tightened on credit as they were scared of lending to each other
* cheap loans began to disappear.

6. LACK OF GOVERNMENT OVERSIGHT
* after deregulation in late 1990s, banks & brokerages were allowed to keep many loss-making investments ”off balance sheet”

7. POOR RISK MANAGEMENT

8. FAILURE OF RATING AGENCIES
* too slow in cutting ratings of banks

9. UNCONTROLLED SHOERT-SELLING
* short-sellers drove down weakened banks faster

10. GREED
* blame it on a culture that gave outsized rewards for success and risk-taking but did not penalise failure.

Dow, S&P gain on bailout hopes, Nasdaq slips

NEW YORK - Stocks ended mostly higher on Friday as big bank shares staged a late rally on hopes lawmakers would hammer out an agreement on a US$700 billion financial-sector rescue plan this weekend.

But tech shares took it on the chin, keeping the Nasdaq in the red, after a disappointing outlook from BlackBerry maker Research in Motion. considered a bellwether for the sector.

Friday's market gains were in sharp contrast to the rest of the week, which was the worst for the benchmark S&P 500 since May.

Trading volume was light, with most traders glued to the increasingly acrimonious debate in Washington over Treasury's plan to mop up bad mortgage debt from bank balance sheets to get them lending again.

Shares of JPMorgan Chase, up 11 per cent and Bank of America, up nearly 7 per cent, ranked among the top gainers in both the Dow and the S&P 500. An S&P index of financial shares rose 3.2 per cent.

The Dow Jones industrial average was up 121.07 points, or 1.10 per cent, at 11,143.13. The Standard & Poor's 500 Index was up 4.09 points, or 0.34 per cent, at 1,213.27. But the Nasdaq Composite Index was down 3.23 points, or 0.15 per cent, at 2,183.34.

The fate of the rescue plan pushed nearly everything else to the background on Friday, including US bank regulators' move to close Washington Mutual late on Thursday, the largest US bank failure in history.

Source: Singapore Business Times - 27 Sep 2008

With penetration of the short term support 3.62 yesterday, Capitaland traded as low as 3.57, a low not seen since January 2006, continuing its trend downwards.

Its chart looks very bearish in the short term with more lower lows expected. It is not the right time to enter long on it at the moment. Selling short has a higher probability of making profit than going long.

Short term resistance is kept at 4.20, next support at 3.40.

Wall St jumps as bailout approval nears

NEW YORK - Wall Street snapped a three-day losing streak on Thursday as Congress closed in on a deal for a US$700 billion financial-sector bailout that investors hope will thaw credit markets and revive lending.

All three major indexes ended up at least 1 per cent, with bank shares such as JPMorgan Chase and Bank of America leading gains after Senate Banking Committee Chairman Chris Dodd said lawmakers had reached a "fundamental agreement" on the principles of a rescue plan.

Companies seen as economic bellwethers, such as IBM, also rose on hopes the rescue package would spur a pickup in consumer and business spending.

The Dow Jones industrial average was up 196.89 points, or 1.82 per cent, at 11,022.06. The Standard & Poor's 500 Index was up 23.31 points, or 1.97 per cent, at 1,209.18. The Nasdaq Composite Index was up 30.89 points, or 1.43 per cent, at 2,186.57.

The package to which Congress tentatively agreed would make a first slug of $250 billion available immediately, the Wall Street Journal reported, and would contain limits on 'golden parachutes' paid to company executives.

Source: Singapore Business Times - 26 Sep 2008

Straits Asia Resources is apparently still in the down trend, trailing below the 20-day simple moving average (20-day SMA).

The recent low of 1.46 has turned into a near term support. If this support can be maintained, coupled with more trend reversal indications, 1.46 might turn out to be the bottom. One such bullish signal would be the breakout of the current resistance at 2.07.

In the meantime, Straits Asia will move within the range of 1.46 and 2.07 with the tendency geared towards down.

Bailout worries hit Dow, S&P, techs help Nasdaq

NEW YORK - The Dow and S&P 500 edged lower on Wednesday as uncertainty about when Congress might approve a proposed US$700 billion financial sector bailout offset Warren Buffett's US$5 billion bet on Goldman Sachs.

Fear that congressional wrangling could delay or weaken the Bush administration's plan to mop up bad mortgage debt from banks' balance sheets kept stocks in check throughout the day.

The Nasdaq, though, clung to slender gains on hopes that technology spending would increase once a version of the bailout plan becomes law. The Dow and S&P declined for the third straight day.

Federal Reserve Chairman Ben Bernanke urged Congress' Joint Economic Committee to pass the bailout, saying delay would keep lenders from extending credit to households and businesses, but lawmakers voiced doubt about the size and scope of the plan.

The Dow Jones industrial average was down 29.00 points, or 0.27 per cent, at 10,825.17. The Standard & Poor's 500 Index was down 2.35 points, or 0.20 per cent, at 1,185.87. The Nasdaq Composite Index XIC was up 2.35 points, or 0.11 per cent, at 2,155.68.

Despite uneasiness about the bailout, traders said Buffett's decision to invest US$5 billion in Goldman Sachs was encouraging. Goldman's stock rose 6.4 per cent to US$133, while the Class A stock of Berkshire Hathaway, Buffett's holding company, added 3.5 per cent to US$133,300.

Source: Singapore Business Times - 25 Sep 2008