Ho hum … On Tuesday, the market took back a good portion of its losses from Monday. Yawn … I’m sorry. What was I writing about? It seems I got bored for a moment and drifted off …

These days the above is how I feel about the market on a day-to-day basis. Longer term, I am quite excited, but the tediousness of the chatter day in and day out is quite boring. All of the “bright” minds and great money managers in the world of the market throw their well-founded and quite opposite opinions out there for all of us to digest – Italy this, Bernanke that, and the chart shows a kitchen sink filling up and then draining out, which predicts whatever.

The simple reality is this – uncertainty is playing with the market’s emotion, once again. Furthermore, until that uncertainty goes away, the market will continue to act like, well, a kitchen sink filling up and then draining out.

The truth is that trying to predict what the market will do from day-to-day is an exercise in futility. In this current state of tension, an irrational fear (such as the hawkish comments in the Fed minutes) can spread like a grass fire on the Australian plains. Once it starts, the news that rain is coming does nothing to slake the fire. No, the fire burns until Chairman Bernanke sits in front of a microphone and states, in no uncertain terms, that he will not remove the punch bowl until the party can go on without it. Suddenly, as his words emanate outward, the rain comes, the fire goes out, and all is green again, for the moment. What? I’m sorry. Did someone say something about the Italian elections and a burning fire?

  • Bernanke’s comments helped ease investors’ concerns about a stalemate in Italy after a general election failed to give any party a parliamentary majority, posing the threat of prolonged instability and financial crisis in Europe.

My mixing metaphors aside, the above lament points to a certain frustration in my voice. I know that is irrational and not helpful for a market player, but I can’t help it. How can fear about an unknown future burn up the reality of current good economic data?

  • China required 4.2 million kilometers (2.6 million miles) of copper cables in December, the most in nine months, to satisfy demand for electric grids, housing, autos, and exports.
  • The Conference Board’s Consumer Confidence Index, which had declined precipitously in January rose in February. The index was reported at 69.3, which was well above the consensus expectation for a reading of 61.5, and above last month’s revised reading of 58.4.
  • A gauge of planned U.S. business spending increased by the most in just over a year in January and new orders for long-lasting manufactured goods excluding transportation rose solidly, pointing to underlying strength in factory activity.

Oh, I know. It is hard to look at the potential of a growing global economy and get excited when the US politicos have made uncertainty a way of life for everyone. Perhaps this is part of my frustration as well. Once again, we have a manufactured crisis that will require a last-minute deal, a deal to stave off disaster just for a short time.

  • However, the central bank chairman also urged lawmakers to avoid sharp spending cuts set to go into effect on Friday, which he warned could combine with earlier tax increases to create a “significant headwind” for the economic recovery.

My advice to anyone who wants it is to sit tight, to wait for the water in the sink to stop draining and level off. Buy on the dips if you feel the rains are coming, but be careful not to get caught in the fire, or something like that anyway.

Trade in the day; Invest in your life …

Trader Ed