It's The Worst Of Times, It's the Best Of Times

Oil futures rebounded today after last week's panic selling to 13-month low at 77.70. Currently trading 82.18, oil's recovery was due to strengthening in Euro and the oversold condition after the sharp decline last Friday. As outlook remains bearish from both fundamental and technical perspectives, we reckon upside to be capped below 90.42. Upon resumption of major decline from 147.27, next downside target would be seen at 75.37, 61.8% projection of 147.27 to 90.51 from 110.45, first.

The euro jumped the most in three weeks against the dollar today as investors were thrilled by the unlimited capitals provided by central banks to ease the credit freeze. The 15-country union announced a rescue plan which includes guaranteeing new bank debt until the end of 2009, allowing governments to help banks by buying preferred shares, and rescuing important failing banks through emergency recapitalization. The ECB would conduct dollar auctions at maturities of seven days, 28 days and 84 days at a fixed interest rate. Following its close counterpart, Britain also announced to bail out three major banks with 37 billion pounds Monday.

Asian and European stock markets significantly rebounded today with HK market added 10.24% to 16 312. The index tumbled 7% last Friday. Australian stocks rose 5.6% to close at 4180.7. Germany's DAX was 6.8% higher at 4,853.59, while France's CAC-40 was up 5.8% at 3,361.56.

Despite the positive catalysts, weak economic outlooks continued to weigh on oil price which is unlikely to turnaround at least until 2H09. According to Bloomberg, the median estimate for U.S. growth in 2009 has declined in eight of the last nine months. Currently, 90% of those surveyed believed economy is entering recession, compared with 50% in May. The US economy will grow 0.1% next year, according to IMF.

While economists have been talking about the financial tsunami are facing as the worst one since 1987 and there will be more financial giants collapsing, I have read some articles advising people to start picking stocks with good fundamentals. The best and the worst for a stock market is when it's in the third phase of the bear market. Richard Russell described the third phase as "Capitulation". During capitulation, "every segment of the population decides to give up and sell - whether it's a Dow 30 stock, a Nasdaq 100 stock, a pharmaceutical or consumer durable stock (so-called defensive stocks), a financial stock, or even the latest stars such as security stocks, or REITs such as NFI and AXM." It's the scariest phase, yet it's the phase that a bull market follows. Is there any of your friends suggested picking the bottom or asking which sector is worth buying now? If there is, the market is yet bottom out!

Gold price continued its gyration within a broad range of 822.5 to 936.6 after falling $100 but rebounding above the lower boundary last Friday. Today, we expect the precious metal would continue consolidation with upside bias but volatility would be less than last week. 55-Hourly EMA at 890 should offer some resistance.

Buying gold is a concept in contrary to the stock market. Gold's attractiveness is at the safe-haven characteristics. SPDR Gold Trust, the largest ETF backed by bullion, increased gold purchase to 770.64 metric tons from 765.74 tons on Oct 9.

The yellow metal's intraday strength was partly brought about by weak dollar. USD fell to 4-day low against Euro and pound after announcement of rescue measures in the European countries. The dollar is currently trading 1.3669 against the euro, compared to 1.3407 late New York Friday. Against the pound, the greenback reached a high of 1.6930 in Asian morning before losing ground and declining to a 1.7224, compared with a close of 1.7037 last Friday.