Ok, so a lot of analysts have tripped over themselves saying that the markets have, or should , bottom here. I respectfully disagree. This is mostly due to volatility profile, and available liquidity in the market.
Volatility profile – market bottoms just don’t look like this.
During both the 2008 meltdown, and the 2010 European sovereign debt crisis part 1, volatility went up, consolidated or retreated (in 2008 it did so a few times), had a last rally and then fell back slightly before the market bottomed out. This time around, it has not even fully consolidated yet, but I expect this to be the case soon. Now, the question is, why should this time be any different? Ok, short selling bans are in place in smaller Asian and European markets. Didn’t help last time they were in.
Liquid markets – real panic has not set in yet
Commentary from market makers indicate that the selling is “orderly”, there is no lack of liquidity and spreads are still relatively tight. Sure, this might be because of algorithmic trading providing more quotes than necessary, but it’s still unnerving that the markets can fall like this without the added impetus of liquidity shortage. This is highly speculative, but I suspect that there could be a dry-up of the markets that wouldn’t restrict them from falling another 10-15% very quickly, with a few more % (5-10?) before an absolute bottom. What speaks against this is that earnings are high, and that P/E Numbers across indices are close to where they were at the bottom of the 2009 market. The major question at the moment is if this is story beats whatever negative earnings outlooks one might ascribe to the economy.