每日市场点评 --- November 20, 2007

In yesterday’s market update, I was predicting a reversal might come soon. We actually got two reversals today – luckily, the market finished the session in positive territory. Even before the US market opened this morning, there were already reversals in overseas markets. For example, the Hong Kong’s Hang Seng Index dropped more than 1000 points before closing its session up by more than 300 points. At 7am ET, the Dow future indicated that the market would open higher by more than 100 points. Then bad news came at around 7:30am when Freddie Mac announced it may need to boost its capital and cut dividends due to tough condition in the mortgage market. The futures market quickly sold off following the news. By the time the market opened at 9:30 am ET, the futures market indicated a flat open. Freddie Mac was opened sharply lower and at one point it dropped by more 35%. However, outside the financial sector, most sectors held up pretty well and in fact were quietly moving higher. By 10:30am the market was actually up by more than 140 points. So we get our first reversal today. Then another wave of sell off came at around 1pm as the market was uncertain about the Fed minutes and its economic forecasts. The minutes came out at 2pm and not surprisingly, it was a very close call in the last Fed decision. The Fed also lowered its outlook of future economic growth. At 2:30 pm, the Dow was off by more than 100 points. Just when some people (including myself) thought it would be another bloody day on Wall Street, the second reversal came. Led by energies(as oil hit another record high today) and financials, the market quickly moved to positive territory and the Dow was actually up by more than 100 points after down by more than 100 points not even one hour before.

On the surface, it seems we have got what we need: really bad news without follow-through sell off, a reversal (actually 2) with the market finishing the day in a positive tone. In addition, many stocks had more than 10% movements in today’s trading and most finished the day well off their intra-day lows. But don’t forget this week is a holiday week. It is very likely that some institutions don’t want to hold short positions into holiday (as can be seen by heavy futures market buying activities before the second reversal). So unfortunately for bulls, they may have to wait until next week to see whether this reversal is real.