We’ve rallied for 14 months and today a 2 percent down move is enough to send the collective cable investment/trading commentators start looking at one another like Freddie Krueger is behind the teleprompter.
This is a combination of the continuation of the Greece issue. Now we are to believe, like the domino theory of the 1950’s, we are not looking at countries falling one by one to communism. Instead, the fear is that every nation with potential problems in the EU from Ireland to Portugal, the fear is that they will all follow suit. At some point Germany, apparently the only country in the EU with any fiscal strength, will just have to grin and bare it. (intentionally mi spelled).
I think today’s action in the Dow and S&P is to be expected. The S&P cash is flirting with the 62% retracement area at 1228. Isn’t it interesting that NOT ONE story on cable has made mention of the importance of this level. Instead, they look to the tea leaves and fundamentals to try to explain these markets.
These markets are motivated by two things 1) fear and 2) greed. We are still running on fear, I would argue.
The greed, however is raising its head. People don’t want to think about how much they gave up by not being in the market over the past 14 months.
I’d sit tight until Friday’s unemployment extravaganza.
In 1998 through 2003, we had daily swings of 200 to 300 points. I know. I stood in the Dow pit and traded through them. We are just finally getting some volatility back in an other wise dead market, and people seem to have forgotten that this is what markets do. Large amounts of participants get long or short based, not on some government approved algorithm for risk.
The market will tell us what’s up. Just let it breathe.
I am still cautiously bullish. However, if you are trading this market from the long side, you MUST use your sell stops to protect yourself against adverse moves to the down side.
I still think we are climbing a wall of worry. Friday’s unemployment number may be a classic, “buy the rumor, sell the fact” type of number.
Good Trading
