The current month has certainly been the worst in recent stock exchange history, with the global credit crisis causing strong turbulence in financial markets but also fueling extensive fears among investors. And as long as foreign investors appear bent on selling off, the Athens Exchange (ATHEX) seems powerless to react. Already, since the first session of the year, more than -30 billion has been taken out of the country, resulting in the total stock market worth dropping to -165 billion. The last week of January 2008 was a particular nightmare. An extraordinary meeting of the US Federal Reserve, which decided to cut US interest rates by 75 basis points, was not enough to dispel fears prevailing in all markets. Sell-offs on ATHEX continued unabated, irrespective of this past week’s 2008 turnover record. Among senior executives and managers in the domestic stock exchange community, no one is currently in a position to make even a small, short-term prediction. Technical analysis models for the Greek market show that the breaking of the 4,000-point mark may ultimately lead the market to even lower levels. The current levels of ATHEX are equal to those of October 2006, with the majority of caps having lost much ground. Significant losses Since the highs of October 30, 2007, when the general index stood at 5334.50 units, the stock exchange value has been slashed by almost -60 billion, with the main index shedding 25 percent. Owing to a lack of defense mechanisms, it is almost certain that it will be foreign investors’ moves that dictate the eventual stock exchange direction. However, even in the case of an upward technical adjustment, the big question remains: How will stocks in which foreign investors hold large, increased positions behave. No one seems to know if and when the next wave of sell-offs will come. Technically speaking, indications point to a sharp drop, both for the FTSE index and the general index. Frail predictions In such a period of high volatility, predictions are especially risky and the domestic stock market appears to be influenced, as it always has, to a much higher degree compared to other global markets. This is primarily the result of psychological rather than real underlying factors. Given that the efforts of central banks (FED, ECB) so far have failed to remove market uncertainty, expectations are that risk aversion will remain high, while demand for liquidity may continue for the remainder of the first quarter. Such high levels of risk and high demand for liquidity may also adversely hit or at least distort the positive image of the Greek market. That is exactly why the investment outlook is being described as cautiously optimistic. The domestic stock market is influenced by a wave of negative developments in the global economic environment, which is impossible to predict. However, in the present environment of uncertainty and intensifying gloom, the domestic market must above all deal with investor sentiment, as opposed to fundamental factors such as valuations and economic growth, the majority of which are still on a favorable path.