For currency traders, whether you were a longer-term position trader or a shorter-term scalper, you saw plenty of price movement in the forex market this year.
For local stock market investors……it is a garbage year……but if you are a stock market index player…you could short the market and make a bucket of ringgits.
In my perspective the price movement of the major currencies can be summaries as follows;
The EUR USD closed the year with its first loss since 2005. The euros was badly beaten by the risk averse investors as the financial crisis escalated, investors started dumping higher risk assets including stocks and commodities and parking the money in the United States. Despite efforts to boost the Euro by keeping interest rates high, the European Central Bank started to cut rates late in the year as economic reports showed the Euro Zone economy weakening.
The big loser was the British pound. Investors aggressively sold the Pound as the U.K. economy sunk into a depression led by a terrible housing market and an extremely tight mortgage market. During the last week of 2008 the Pound made a new low against the US dollar for the year as traders positioned themselves for a rate cut down to zero early in 2009.
The Japanese Yen was the winner in 2008. The rally in the Yen was led by the unwinding of carry trades. During the stable years leading up to 2008, traders had been borrowing Yen at cheap interest rates to invest in risky assets. Once investor sentiment shifted toward risk aversion, traders quickly began to unwind their carry trades by buying Yen and selling Dollars and Euros.
By the end of 2008 the rally in the Yen hurt Japanese exports, weakening the economy and leading to losses from major automakers. At current levels, the Yen looks a little toppish as threats of intervention and a recent interest rate cut has curtailed the aggressive buying.
The bursa saham Composite Index went below its 50 and 200 day moving average since march 2008 which is an important indicator for me, indicating a bearish market since the first quarter of the year.
Is there a probability of a huge decline right after a huge decline?That is where the stock market world is now. The market is wading through the aftermath of a huge decline climbing to the 50 day moving average by the year end, trying to sort it all out.
If we referred back to the last bear market in 1997, there was a huge decline followed by a rebound and than a subsequent huge decline before the market going through a long bull market that last until early 2008.
Most of Elliot Wave practitioner in Wall Street expecting a 5th wave of a 5 Elliot Waves decline with the current uptrend as a 4th wave correction in S&P 500 and Nasdaq. They are expecting a nasty decline of 5th Wave with a target back down approximately 600 on S&P 500.
