Paris index CAC 40 has ended on a drop of 9

If this is not yet a crash, it starts to be furiously. Yesterday, the stock markets have experienced a new "Black Monday". Not only the adoption by the Congress of the U.S. banking rescue plan has not reassured the operators, but they were panicked before new signs of extension of the financial crisis in Europe. The record of the day is catastrophic. Part of Asia early in the morning, the storm swept away all stock indexes. Falls, already spectacular afternoon, further exacerbated after the opening of us markets. At Wall Street, the Dow Jones was quick to push the bar symbolic 10,000 points for the first time in four years, which had still accelerate sales, until he tries an attempt of stabilization. After dove from 5.69 at the height of the session, the indicator light of the New York Stock Exchange retreated still 3.58 at the close, while the S & P 500 index, considered more representative, rusting 4.34.

Short term,

The meeting was particularly difficult for the European places, which decreased by 7.5 on average. Paris, index CAC 40 has ended on a drop of 9.04, the highest since its inception in 1988, after losing up to 9.83, falling in the passage below the 1,000 EUR billion in market capitalization.

So, this meltdown occurred in volumes which remain relatively moderate. Exchanges on the CAC 40 were barely exceeded EUR 7.6 billion, which is not unique. The market is looking to capitulate, but without really achieve. This is a sign of an activity entirely in the hands of dealers desperately seeking cash and betting on further declines near term. Therefore the scholarship reasons more than in the short term, forgetting all the fundamentals to not bet on the psychological aspects.

Only one issue today taps the individual and institutional investors: the markets have hit their low point "It is impossible to determine when will take place the bottom of a market cycle," says humbly Grant Bowers, managing portfolio in Franklin Templeton. "We know simply that so far S & P 500 index is is always adjusted quickly after the low point of the bear market." This is verified at the end of nine other down cycles that have already known the markets since 1957. "Technical indicators indicate a situation of extreme stress generally above significant rebounds", confirms Jean-Marie Mercadal, Manager at FIO. The head of the US strategy of Citigroup, Tobias Levkovich, is more certain, believing that a floor is actually formed.

Question of cycles

Everything is therefore "timing". The average length of the nine last bear cycles, during which the & S P 500 has lost at least 20, was thirteen months. Gold markets are just ready to address today a thirteenth month of decline if one considers that the current movement began on October 9, 2007.

Remains that certain phases of downturn lasted far longer. This is the case in the previous cycle, which started with the bursting of the technology bubble in March 2000. The decline in prices was then held on 31 months. But it was followed by a strong rebound by 14 over the six months which had succeeded the low point affected by the & S P 500...