DJIM #43, 2008

After digesting some of the action in the past couple of weeks, the only thing stands out on everyone's mind is "when is this madness going to end?".   This includes those Bears as this is not an easy environment for anyone.  The biggest bears in blog land have been calling the bottom for days now, if not weeks only to be burned trying to be ahead of the bottom.   Unfortunately, we will only get an answer to this 'bottom question' after the fact and we'll keep on saying be patient and wait for downside momentum to slow.   We are waiting for bottom process to be confirmed by smaller intraday ranges.   We feel lots of people are still looking for this "mother of all" whoosh that can give us THE bottom and many are calling for it this week,  even Monday.    Based on the market volatility indicator, VIX, we feel that it's going to take a series of medium sized "whoosh" to maybe mark a bottom.  We discussed this possibility weeks ago that we just never get that capitulation, instead a slow bunch of burns!.  Since we are facing some issues here that are unprecedented in scale,  we ought to expect some very extraordinary action to end this crisis.     Yes, that means forget about reading up on past "crashes"!    Each crash or market bottom are very unique in their own ways and it's just silly to draw any parallelism in order to make a trading decision now.    Fundamentals, Technical Analysis may have been thrown out the window to a big degree.  These are extraordinary times and we may be writing some new chapters on both of those fronts.

Late last week, as global market crashed to earth,  U.S markets actually managed to outperform them.   Certainly,  this is not something we should be cheering for as it could mean that we have ways to catch up with the rest of the world.   Why should all countries be punished any more than the starters of all this.   We are just seeing equity markets catch up to the credit markets!.   So, who knows.   The mentality in the current trading environment is very toxic.    In the past week, we have seen some earning reports that aren't as bad as market would lead you to believe.    Regardless the quality of the reports, you'll be lucky if the stock gets a muted reaction.    Therefore, this earning quarter is almost a complete write-off up to this point.    It seems when investors mindset are set to a certain view,  it's just comical to even try to convince them otherwise.      The message is pretty loud and clear out there, everybody needs or wants to raise cash through the selling of equity.  We've all talked to relatives, friends, even industry associates, and the consensus is the same.     Things will get rocky in the coming months and you want have some cash to cope for any inconceivable events or simply, just out of the markets.      So, it's not that the market has not reached a cheap value,  it's just the fact that people are reallocating assets from equities to cash for whatever reasons.    This is definitely frustrating for those who invest/ trade equities for a living.

Of course,  all things will come to an end and even the "forced sell",  liquidating,  mutual fund redemptions and all of the selling action will come to an end at some point.     At this point,  you can say that we are closer to it than we were a week or two weeks ago.     However, the severity of the selling still has not slowed down a bit as of Friday.

In the coming week, we are going to have some busy stuff to deal with.    Economic events such as GDP report and  Fed meeting that will dominate that side of things.    We also have many earning reports to monitor just in case.    In addition, isn't the coming week the last week prior to the election?    Oh boy, and we just came off a week where we had some of the nastiest global assets selling.   Follow through melt-down?.   Big melt-up?,  remember,  neither confirms a bottom is in as we all witnessed recently.