Global stock markets went through two weeks of very bloody, gut-wrenching sessions. The Dow Jones Index (DJI) lost almost 2000 points in 3 weeks. Going through the last 10 sessions was like fumbling your way through a multi-level deep dark tunnel. As soon as you thought you saw the end of the tunnel, you stumbled into a deeper, darker hole. Triple-digit deep red figures were intertwined with only two very small greens. To make it worse, DJI stumbled over 600 points (5.5%) yesterday, sending the market into a full-blown panic. VIX, a gauge of fear, surged to 48, a level unseen since the flash crash.
"Is this the bottom?"
This is the multi-trillion question that is on the mind of every other person, be it someone who is enduring pain in the stock market or who has plenty of cash set aside waiting to invest. For a few days, yesterday may have found the bottom for the market. In fact, if the Fed Chair, Bernanke can give a little bit more than just a rhetoric like the one given by President Obama, the extremely oversold market may very well recapture 300-500 points in a couple of days. However, the development beyond a few days is far more difficult to conjecture. It all depends on what kind of rabbits the Fed and hopefully, the government, pulls out of their hats.
"What is the problem? "
What is more worrisome than not knowing the answer is not knowing the question. Not many people out there can tell exactly which problem is at the core of this precipitous fall. Therefore, one cannot tell whether it is a bottom until he knows which rabbit should be pulled out of the hat to be a solution.
There are three problems that are cited by most as causing the sell-off. The list may expand.
1. Europe debt crisis
2. The worry that the US economy maybe heading at a double dip, and bringing the world with it.
3. S&P downgrade of US government debts
Which one is it? Until we ask the right question, we cannot hope for a right answer.
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