I’m writing another article in follow-up to last week. The main developments are:

  • Subprime credit default swaps settled at impossibly low numbers, making further securitization practically impossible
  • The widespread repricing of risks is underway. Forget ABX.HE, look everywhere where risk was possible and see the retreat
  • Major investment banks are trading below 200-day line, it’s the market reaction to the dangerous games they are playing
  • Yen had jumped, people say carry trades are unwinding
  • There was the biggest jump in implied volatility VIX index ever

I think we are switching from violent corrections typical for bull markets to slow deterioration of a bear market. People will slowly understand that repricing of risks affects fundamentals, too. It’s not just a trading phenomena. What to watch next week:

  • Most important is Yen. If it grows another 3% the world markets will wet their collective pants. Even 1% will make trouble
  • Anything related to credit default swaps, that’s where the panic could be
  • Hedge funds will report Feb results – watch who’s belly up
  • March 6 is pending home sales. I expect bad surprise – watch market reaction
  • ISM report should be ok
  • Nonfarm payrolls should be non-event

I expect markets to slowly deteriorate, waiting for more bad news. This won’t be a fast correction and then move up, like last year. It will be slow and boring slide.