Market has memory

Stock market is just like a reflection of human life, one moment you are at the high, the next moment you could go down significantly. Dow dropped 366.94 points on 19 Oct trading. The day happened to be anniversary of Black Monday crash occurred on 1987. I noticed that there are several special date which stock market remembers. When the date comes, stock would drop on that day. To a logical guy on the street, this is totally insane, what has the event happened so many years ago affects today?

However, it has came down. So what do you expect on Monday? It would be a knee jerk sell down. Then, maybe at end of day or Tue, some players would come back for some bargain hunting.

The recent strong rebound caught many of us surprise, we never thought that it would come back almost instantaneously. Although for the past few weeks, the stock market was hot again, I was reluctant to put more money into it. On one side, I pretty much hit my allocation ration, on the other side, I don't think the risks have all disappeared. I think most probably, the coming 1 month would be another see saw month. It is good time to pick up some bargain which suits your investment criteria. Risk remain, but if you hold for long term(depends on what you buy), it should be alright. Asia boom is a big trend which is going to last for another 10 or 20 years.

The key risks at this juncture are
1. Oil price. The current price already trigger rounds of inflation in the world. I suspect we can't hold the inflation low any longer.
2. Credit crisis. The event is not over yet at US. As new round of news erupt, we probably would see another round of selling. Although I disagree that it would be as violent as previous round. Because those hedge fund that need to pull out, would have gone, left those longer term investor.

Another notable point last week was the big drop of India. The proposed "capital control" cause the India market to crash. It is a long overdue crash. No matter how hot the economy is, no one deserve that kind of valuation. For those that have put in money into hot India fund, it might be too late to regret. However, don't put your new money into India market too fast. Once the liquidity dried up, the market is likely to underperform for a while. We have not seen the true magnitude of problem yet.