After a small rally on the open, markets in New York resumed their downward spiral despite strong hints of an imminent cut from Fed chair Ben Bernanke. Stocks fell over 5% and broke through some important psychological support levels as the Dow closed at 9447 and the S&P at a shocking 996. We're clearly in uncharted waters here. While I had wondered if we would see a rise today, the bearish mood shows no signs of lifting. Even if there is a relief rally tomorrow, Thursday still looms as a possible big down day that could take us down to 9000.
Indian markets similarly started off in the green on the strength of the RBI rate cut, but succumbed to selling pressure and ended unchanged. It seems that Nifty 3400 may be breached quite soon before any kind of rally. Look for 3000 by November.
After the smoke clears this weekend, I think the market will stabilize from about Oct 15 to 23. This might be enough reason to try to cover some short positions this week. Another move down is likely after that. It seems that we may get to 8000 by November. Wow.
Oil is moving with stocks and closed mostly unchanged at $89. Another move below $85 is in the cards.
As suggested in our forecast, the Euro had a nice bounce today and finished at 1.3612. Any rallies here are potentially lucrative shorting opportunities.
Gold had a good day and closed up 2% at $886. Rallies may be cut short in the days ahead especially with the approaching Sun-Rahu aspect.
