A Long Strange Correction as ASX Falls 3%
Just six weeks ago it was a race to see which of three shares would be the first on the ASX to crest AU$100. Would it be Macquarie Bank, CSL, or Rio Tinto? What a long strange correction it’s been since then.
Mac Bank copped it worst of all in yesterday’s 3% decline on the local index. It was the worst day since the week after September 11th, 2001. Riding the wings of the subprime storm, Macquarie shares lost 10.5% on the day to close at AU$73.70.
Yesterday’s selling had more than just a whiff of panic to it. The market reeked with the smell of fear. “All the major stocks have fallen. The banks are all down, all the retailers are having a bloody shocking day, all the resources are getting hammered ... It's hit them all square on the nose,” said ABN Amro’s Bill Bishop. “I wouldn't like to put a figure on it, but there's a fairly good chance things aren't going to be too flash tomorrow.”
He could be right. Wall Street mysteriously recovered in the very last hour of trading early this morning. “U.S. stocks rose after a rally in computer and consumer shares lifted the Dow Jones Industrial Average 150 points in the last 20 minutes of trading,” reports Bloomberg. Was it program trading that flashed a buy signal after the market lolly-gagged for most of the day with a 79 point loss?
Dan Denning
The Daily Reckoning Australia
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About the Author
Dan Denning is the author of 2005's best-selling The Bull Hunter (John Wiley & Sons). A specialist in small-cap stocks, Dan draws on his network of global contacts from his base in Melbourne, Australia and pens the small cap newsletter, The Australian Small Cap Investigator. He is also a contributing editor to the Australian resource investing publication Diggers & Drillers.
Comment by Hobbo on 3 August 2007:
The last minute recovery is more likely the Plunge Protection Team in action. Think about it bearing in mind the herd mentality of the markets - when would be the best time to have a massive upswing - at the beginning or in the middle of the day when those massive inputs can be taken as profits? A better scenario is inflate the market at the dying end, where it will go on to impact on the rest of the global markets that take the Dow's lead. The ASX almost always reflects the trend at the end of the Dow day's trade, which subsequently leads onto the London exchange and all the way back to the Dow again the next day. This is of course happens on a macro scale and local issues will always have an effect on those markets also.
Comment by Bevan Liebke on 4 August 2007:
Hi Dan
My first enquiry since subscribing to the DR some 18 mths ago. Can you help to clarify something that's been promoted on DR...The Insider Code? How does the promoter personally help (supposedly in real time) with purchasers on the other side of the world ...in OZ. Don't know whether you can pass this on - understand the need for confidentiality but is there a proxy email address that I may contact to maybe asked more questions? Appreciate any assistance that you can provide. Finally, enjoy the DR - particularly the contrarian position often taken and the informative/entertaining style of commentary.
regards
Bevan