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WIG20 - will it predict the worldwide Stock Market Crash of 2009?

Seeing as the Polish stock market was the first one to turn the downward slide in February 2009 (elsewhere, the rally started on March9), will it be the first to start the next stock market crash ... predicted by some to start in July/August?

One warning sign for the next slump would be a sudden upward surge in the WIG20. This could be starting right now - yesterday it rose 1.92% Other signs will be increased confidence and stories in the press about recovery and house price stability.

Scary times.

Re: WIG20 - will it predict the worldwide Stock Market Crash of 2009?

Dead Cat Bounce

"A dead cat bounce is a figurative term used by traders in the finance industry to describe a pattern wherein a spectacular decline in the price of a stock is immediately followed by a moderate and temporary rise before resuming its downward movement, with the connotation that the rise was not an indication of improving circumstances in the fundamentals of the stock. It is derived from the notion that "even a dead cat will bounce if it falls from a great height".

The phrase has been used on the trading floors for many years. However the earliest recorded use of the phrase dates from 1985 when the Singaporean and Malaysian stock markets bounced back after a hard fall during the recession of that year. Journalist Christopher Sherwell of the Financial Times reported a stock broker as saying the market rise was a "dead cat bounce". It has also been used in reference to political polling numbers.

The reasons for such a bounce can be technical, as investors may have standing orders to buy shorted stocks if they fall below a certain level or to cover certain option positions. Once those limits are reached, the buy orders are activated and the sudden rise in demand causes the price of the stock to rise as well. The bounce may also be the result of speculation. Since bounces often occur, traders buy into what they hope is the bottom of the market, expecting a bounce and thereby reaping a quick profit. Thus, the very act of anticipating a bounce can create and magnify it.

A market rise after a sharp fall can only really be seen to be a "dead cat bounce" with the benefit of hindsight. If the stock starts to fall again in the following days and weeks, then it was a true dead cat bounce. If the market starts to climb again after the first short bounce, then the continued rise in price action would be considered a trend reversal and not a dead cat bounce. Since this distinction only becomes obvious in hindsight, the evaluation may vary depending upon the initial and final points of reference."

Re: WIG20 - will it predict the worldwide Stock Market Crash of 2009?

The Final Surge in the stock market is now on - all the usual stories about how the worst is behind us have started appearing in the press. Expect the Warsaw stock market to soar until late August, even mid-September -perhaps to 34,000 (presently 31,790) - before crashing to perhaps 17,000. This could be very interesting to watch as I could be completely wrong and everyone could laugh at my "wild" predictions.

Another strange thing to watch is how the US dollar always goes down as the stock markets go up. The joker in the pack is that the zlot is coming off a low generally (3.03 to the dollar) - expect the zloty to gain more against the dollar until the Crash this autumn, then the zlot's run will come to a halt as Polish govt debt becomes hard to sell. What will happen to Polish public finances when this happens??

By the way, I am a complete amateur at this - self-taught since February this year! I wonder if I will be better than thisismoney.co.uk, for example, which is advocating holding on to your shares/units long term (so you can see how low they can go presumably). Even George Soros, with his army of advisers, says the worst is behind us so I must be utterly bonkers!!

Re: WIG20 - will it predict the worldwide Stock Market Crash of 2009?

I chatted with a foreign friend on the train this morning about when to buy gold. He expects deflation followed by hyperinflation. He's a financial analyst by the way. I'm an optimist - I just expect deflation, mass unemployment, a Great Depression and strong inflation 18 months ahead!

I'm waiting for deflation to send gold prices down before buying. This crisis is like watching a train crash in slow-mo!!

Re: WIG20 - will it predict the worldwide Stock Market Crash of 2009?

Varsovian
I chatted with a foreign friend on the train this morning about when to buy gold. He expects deflation followed by hyperinflation. He's a financial analyst by the way. I'm an optimist - I just expect deflation, mass unemployment, a Great Depression and strong inflation 18 months ahead!

I'm waiting for deflation to send gold prices down before buying. This crisis is like watching a train crash in slow-mo!!



I think Poland is in a pretty good position and this negative prediction will never happen. Of the many reasons to give, lets say low worker income and little superanuation contributions has made Poland escape a decline and a recession.

Re: WIG20 - will it predict the worldwide Stock Market Crash of 2009?

My friend, for the record, Poland is not an island and we are just about to sink into a worldwide depression which will be devastating for the world economy. That includes Poland.

I know that sounds unreal - back in 1930 President Hoover thought the worst was over already after a huge stock market rise. FDR then got voted in and made the Depression longer by his fancy spending plans (the US got hit again in 1937). Obama's spending plans dwarf FDR's, and the US, like the UK, Japan and the EU are bust - so the situation now is actually WORSE than then.

You know what I read in the Daily Telegraph today, August 6, 2009?
'Worst of recession over', according to leading UK forecaster
NIESR said it hoped May would prove to be the trough of economic activity. “Output is stabilising and, in the absence of further shocks, the period of sharp recession is over.”

NIESR’s optimism was echoed by the Royal Institute of Chartered Surveyors (RICS), which expects house prices to rise this year, in a startling reversal of its forecast that prices would plunge 10pc to 15pc in 2009."

These forecasters have no idea what is coming - a tsunami is on the horizon that historians will write about in the future. "Never again" they will write ... "How could they have ignored the evidence?"
Asset-destroying deflation for 2 years followed by strong inflation (not hyperinflation), credit implosion, corporate bankruptcies, business projects cancelled (watch commercial real estate stop dead), high unemployment, massive govt cuts, possible reduction in the size of the Eurozone (no chance of Poland joining until 2018/20 - perhaps Portugal/Greece leaving??), civil unrest ...

Stock markets to fall 50% (more?), dollar to rise for a year or so, gold might be the future thereafter. Things will be different and we will look back on these strange times wondering how everything could have gone so wrong.