DJIM #40 2008

It's been exactly five weeks since the labor day weekend and we've had some extraordinary headlines and action from this market ever since.   Was this all expected?    As far as the financial sector goes, we all thought it's due for a real shake out and we had exactly just that during the last few weeks.    Sure, the drama isn't exactly over by any means as the focus is moving on to Europe, especially this weekend.   The crying game conclusion to last week has spread over to Europe this morning big time (5-7% losses), as it takes in our losses of over 400 pts. after their market closed Friday,  plus their own failings over the weekend.   The more we are seeing what's happened,  the more everyone realizes that this is a pure global phenomenon and this is going to change view's on things forever when the crisis is over.  It's been 14 months now since we can say all this noise started and last week saw some of the biggest weekly broad losses ever....CAT 20%, AXP 21%. GE 15%  AA 18% for the big monsters....ECA, PBR, RIG, SU all over 20% in energy sec, TS RIO TCK VCP 20-30%++ AAPL, SAP 20%+...and so on.   You can clearly see nothing was safe!

What probably shook us the most during the last few weeks, is the deterioration of confidence of the global economy.    Not only commodity based plays getting destroyed left and right, many if not most of the international conglomerates are getting beaten down senselessly as well.     We are seeing the chain reaction to just about every sector.    So, this bad mother of all market crisis is affecting assets in all sectors and all over the globe.    What does it really mean to us traders?

First,  we think it's a good thing that assets ARE being revalued and discounted for whatever the recession we may receive in the near future.    The last thing we wanted is that market does not move in sync with the economy.    Here's the thing we have to remind ourselves, "market always moves ahead of the actual event"!    While we all wait for market to come down and values of stocks to get cheaper,  there will be a point that stocks don't go down anymore.     This happens when a combination of bad news or events that don't move down the market.    By then, we have to be ready for a potentially powerful bounce.       Yes, an idea of a bounce is that nothing goes down forever and we have to play that probability.    In the meantime,  we have to do everything we can to preserve our capital and let others play the daily casino moves.    The worst thing we want at this moment is to lose our discipline and play stuff for the heck of playing or boredom.    Know your trading ability and know your own probability of making good plays in this kind of trading environment.    If you've always done great in the time of great volatility, than by all means, go crazy    If you are like most of us, it's better to stay on the sideline for the most part.

We are officially kicking off with earning season in the coming week.  Will it even matter is the big question?.   It'll be very interesting as we monitor the market reaction to company's reports and guidance.     It may give us clues as to which sector is beginning to get money from the market, if we are to getting a reversal started.   As far as today, we would watch for a late day reversal (if) in Europe to move the market here for a intraday trade.