DOOMSDAY SCENARIO, Dec 17-18:
By Daniel at 9 December, 2009, 9:50 pm
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Here is what I think is going to happen next week:
(maybe earlier, if any unexpected news arise, for e. g. insolvency of NY/CA state, Ukraine default, rate downgrades, etc)
Monday (14th):
Dubai (nakheel, dubai world, whatever you call it) will default.
Some profit realizing, safe haven dollar buying, will start. (Markets decline of course)
Tuesday (15th):
FOMC meeting begins, PPI/Industrial production comes, nothing special, but questions might arise about the US debt ceiling after Monday’s auctions, causing fears the US might not able to issue more debt in the near-term. More dollar buying, more market easing.
Wednesday (16th):
CPI, housing starts coming, I don’t think it will be any serious, but a high CPI could be really bad for interest rate expectations.
FOMC Meeting announcement comes at 14:15ET If they say anything about exit startegy, or possible rate hike before July 2010 it might cause dollar strengthening, more realization. If they don’t say anything like this, I don’t expect a rally neither since mood is not like that nowdays. I expect a major market drop (2-3%).
Thursday (17th): DOOMSDAY #1
No special data coming. Articles come out that the continuing resolution expires on next day, which will result a government shutdown on the weekend/next Monday.
Massive and rapid dollar strengthening comes because of the fears US government might not spend money in the near future (which is actually good news for the economy) either because of shutdown and also because of the reached debt ceiling, which results fueling the position closing on stock/commodity markets.
After investors realize Friday is Quadruple Witching (A day on which contracts for stock index futures, stock index options, stock options and single stock futures (SSF) all expire. ) they start closing all their (long) positions.
Friday (18th): DOOMSDAY #2
Asia/Europe crashes as well, US opens lower. I expect 20%+ drop on 17-18th together.
- rokakoma
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