I look like an idiot!!? You too!

This week is really a tough week - guys with tendency to go long is literally dies more than once. Or unless you have 9 lives like cat. DJIA lost almost 20% in one week, almost as severe as 1987 crash. This is worse (I believe), you got 1987 everyday for 5 consecutive days.


(click image for larger and sharper image)

By Wednesday, after losing 10%, honestly speaking I thought further losing another 7-10% was really a low probability event. I saw some stocks suffered more than 20% decline in 1 day.Damn, I was wrong - damned wrong - luckily I did not put any money on the table. I was not alone, read this:

"You make a decision and you look dumb the next day," Mr. Herrmann says. "So you go to gold, and then gold is down. You go to Treasurys, they rally, then they get their noses punched in." His firm overall is holding 22% to 23% of its assets in cash, one of the highest levels ever.

These are signs of forced selling.

The margin calls hit some chief executives who had borrowed to buy company stock. These included Chesapeake Energy Corp. Chief Executive Aubrey K. McClendon, who was forced to sell nearly his entire stake in the company, which he had accumulated in recent years, including a $43 million purchase in July. "These involuntary and unexpected sales were precipitated by the extraordinary circumstances of the world-wide financial crisis," Mr. McClendon said in a statement. "In no way do these sales reflect my view of the company's financial position or my view of Chesapeake's future performance potential."

Deal Journal lead writer Heidi Moore sits down with senior editor Adam Najberg to recap the musings of a panel of financial heavyweights at the NYSE, that included J.P. Morgan's Jamie Dimon, Goldman Sachs chief Lloyd C. Blankfein and others. (Oct. 10)

Other forced sellers included Coca-Cola Enterprises Inc. director Marvin J. Herb, who said J.P. Morgan Chase & Co. had seized 18.6 million of his shares in the bottler, and had already sold nearly 1.4 million of them for $17.7 million "pursuant to a credit arrangement." J.P. Morgan has indicated it plans to sell the remaining shares, Mr. Herb said in a regulatory filing.

The Vix, a measure of market fear based on options trading and tracked by the Chicago Board Options Exchange, rose to 69.95, by far its highest level since it was introduced more than 15 years ago.

I saw this chart on Bespoke website, S & P trading below 26% of 200-day MA is a very rare event. You can only see this in major bear like the Great Depression, 1973-74 bear market, 2001 dot-com bust and etc. The good news when calm return, there will be a very sharp rebound. It will tank right after the bear rally - so be really careful not to be eaten by the bear.



Oil price declined to my target of US $ 70 - US $ 80 per barrel but no hurry to execute any strategy yet.

I will have very light postings next week as I've very punishing schedules ahead. Take care!