The Day that Was - August 14th 2007

Today was more bad news on top of more bad news. Nothing held the markets together today. The selling today now is approaching panic levels.

The news from The Sentinel Group today that they were running into problems with redemptions from Money Market accounts... Wait a second! What did that RebelTrader guy just say? "Money Market", you heard me correctly. This was the news that created the near panic selling today as anything that threatens what is thought to be a 'safer' investment turns out to be not safe anymore then you start having a run on banks if something like that continues. This was the kind of news that sent the financials down fast today.

And the financials were not the only thing that went down.. It is becoming harder to find anything that goes up these days.

The S&P 500 has now erased nearly all of the gains earned in 2007. If we drop to the expected target we will then the market wiped out nearly 2 years of gains. Once gains are erased they don't come back as fast as they went down. Which only reinforces the need to always sell your investments/trades when a major trend is broken. Why wait what could be years to get back to 'breakeven'. Remember that if you own a stock that drops 50% of your investment value. Then that stock has to gain 100% to get you back to break even. A drop of 50% comes faster than a gain of 100%.

So if you sold at a major trend line violation then you kept your gains safe and you could then move that into another investment that will earn additional gains on top of what you have. As opposed to holding on for it to come back and maybe waiting a very long time to just get back to where you started.

On top of everything else we have going on we have to introduce the possibility of another crisis in the making. That old "carry trade" problem again. The Japanese Yen is gaining strength and if that continues we will be in an unwinding scenario again. That on top of our own financial crisis could be the push that takes us into a bear market. See this article from Forbes:

http://www.forbes.com/markets/feeds/afx/2007/08/14/afx4016094.html

Now for some charts: