Just thought I would update my views from yesterday. We’ve got alot quicker to the 7200 level for the FTSE 100 than I thought we would. I still think there are more declines to come over the next few days and I’d revise my very short-term targets for the FTSE 100 down to below 7000 and 2450 for the S&P 500. But to repeat I still think is a bump – my definition of which is anything that is upto a 10% decline. In my view a proper bout of market panic is a decline of 10% or more, with anything over 25% a good old fashioned nasty stockmarket ‘rout’! Again I don’t think we are in a proper panic which involves a major rotation out of risky assets into cash. If anything I see investor’s eagerly looking forward to this turbulence and picking up favoured positions. Also, another measure I use consists of more illiquid closed end funds. These don’t tend to shoot around much in value during bumps but they suddenly come alive in market routs, when even special situations investors head for the exits – with massive price falls the inevitable result. More than a few of the illiquid funds I follow aren’t budging at all, with very little volume.
And for the avoidance of all doubt, I’d be a quiet buyer of index futures and options once the FTSE 100 goes below 7000.