Like Sheep Being Led to the Slaughter..

Wall Street went into manic selling again last Friday. It was the worst trading day this year, surpassing the February sell-down.

Dow went down 281.42 points again spooked by Bear Stearn's late conference call that "its return on equity in July may be close to the lowest ever and borrowing costs may slow mergers and acquisitions." Almost 12 stocks fell for every one that rose on the New York Stock Exchange as all 24 industry groups in the S&P 500 and all 30 members of the Dow fell.

Briefly; the factors that brought the US market down big time were:

• The continuing sub-prime mortgage debacle
• The continuing poor housing property market
  
• Fall in energy stocks as world oil prices fell
• Lower job creation compared to July forecast
• Slow growth in U.S. service industries
• The highest fall of the dollar against the euro in a month.

The world markets now await to see how disastrous will be its effects on their local markets.

Its definitely going to be a temporary bear season. So do not get into second-level fundamental stocks now. Stay out until the US market regains some semblance of confidence. Let them move up in positive territory for a few trading days on good volume. See whether US bonds has move downwards. Have Asian markets move up, disregarding Wall Street or are they still pups to the mother ship Wall Street? Look for confidence-building write-ups on the business pages.

Strategy:

Watch situational stocks such as oil and gas stocks, water play stocks, IDR and NCER stocks. Buy some if they free-fell and lock them up for a couple of months if the shares don't rebound. If the rebound comes, dump them and take profit.

Heartsong