US slide, June 30 sell-off hit Australian Stock Exchange

Sydney Morning Herald ^ | June 23 2002 | By John Synnott

[DeaconBenjamin]

The Australian sharemarket is set for another hit tomorrow after Wall Street fell again yesterday in the steepest first-half slump since 1970.

Our market dropped to an eight-month low on Friday in the wake of global sharemarket declines.

Australian stockbrokers said investors selling off stocks to gain tax credits before the end of the financial year were also weighing down the local market.

The fifth successive week of falls on Wall Street has seen the market value of US shares decline by $US1,520 billion ($2,645billion) this year, according to the Wilshire 5000 Total Market index.

The Dow Jones industrial index lost 2.3 per cent for the week, bringing its five-week drop to 11pc. The S&P 500 index has fallen 14pc this year.

"There was hope we would start seeing a pick-up in second-quarter earnings, and it's just not the case," Liz Miller of US investment company Trevor Stewart Burton & Jacobsen said.

Negative sentiment from Wall Street investors was exacerbated by "triple witching" - the expiration of stock options, index options and futures contracts.

The US slump is likely to depress the Australian sharemarket, which should open slightly weaker tomorrow, Commonwealth Bank head of research David Rees said.

Mr Rees said there was no need to panic because our market had defied the US trend - it rose less in the tech-stock boom and did not have as far to fall back.

"Normally the sharemarket starts rising ahead of the real economy recovering," he said. "But this is not happening - the American sharemarket's going the other way as their economy improves."

[DeaconBenjamin]

$1.5 trillion. That's a lot to lose.

[DeaconBenjamin]

Is any First World securities market healthy? Or safe?

[68-69TonkinGulfYachtClub]

FYI

[d4now]

Thank you for the bump.

What isn't widely recognized is the critical level the dollar stands at right now. If it falls below 108.50 I'm afraid currency traders will get a hold of it and then there's not much hope for a summer rally.

All in all - I hope you're not worried about me. I've prepared well for this - through inverse funds and general market "insurance" through puts as well as being long gold and silver stocks since last summer and fall.

I worry that so many are unprepaired - but try telling anyone last January that the market wasn't going to be alright and it was like beating my head against a brick wall. Or try to convience people to get some insurance through puts....that was even worse.

And if I gave my honest opinion as to what was down the road a bit....not many would believe me anyway. So I just keep plugging along and take advantage of every beautiful day with my daughters.

[DB]

And if I gave my honest opinion as to what was down the road a bit....not many would believe me anyway.

Give it a go. I'd like to hear it.

[Jeff Chandler]

Sounds like a good time to start a business. I think I will.

[d4now]

At least another 250 points lost on the S&P. However, if you look at a monthly chart of the S&P - Technical Analysis tells us that a classic "head and shoulder pattern" has developed. And that tells me the downside target for the S&P is 500, some time within the next 18 to 24 months. Elliot Wavers see things even worse than that.

Depending on what the dollar's doing Monday morning I may sell some puts - in hopes there might actually be a summer rally. Unfortunately, the new OBL threats won't inspire worldwide confidence in the U.S. and the selloff may not abate until after the 4th of July - when nothing happens.

Once the sell off is finished - it will be a time to hold stocks. The returns then should be pretty good. But, imo, the sell off isn't finished.

[d4now]

Well I don't think you'll find a more accommodative environment than right now. And interest rates are at an all time low.

I sincerely wish you the best of luck.