It never ceases to amaze me the manic-depressive nature of financial news commentators. You can tell that most of them have never had a speculative or a hedge position EVER in any market by their demeanor. With the Dow at 10700, a 150 or even a 300 point correction is just that. A blip. I don’t know if these people ever took 5th grade math at all. There’s a relationship in the world called percentages which seems like a foreign language to these fear mongers. Simply put, a 100 point move when we were down at 6500 is more significant than when we are at 10600. 1.5 percent vs. 0.9 percent. For reference, the largest single one day percentage decline for the Dow was Monday, October 19, 1987 the Dow dropped by 508 points to 1738.74 a one day drop of 22.61%.

For the year 1987, the Dow actually ended higher. It opened on January 2, 1987, at 1,897 points and would close on December 31, 1987, at 1,939 points. The Dow did not regain its August 25, 1987 closing high of 2,722 until the end of 1989.

I remember, that, actually, because I had graduated Colgate in May 1988. At that time I had college friends in NYC advising me not to come to NYC to get into the investment business. Things couldn’t have been more bearish then, when in reality, it was the beginning of a huge rally. Just goes to show you what popular opinion is worth, people.

So, back to my focus. Ignore the carnival barkers on cable. They never consider the significance of a down day. To them, it seems, a 1 point loss is as dastardly as a 300 point loser. And a 1 point gain is to be celebrated as much as a 300 point rally. As a trader in the Dow pit between 1998 and 2004, I can tell you that no matter what, the only time we had reporters come down was on large down days. Period. And ironically, what the reporters didn’t understand, or care to understand, was that most local pit traders cleaned up on down days. I really don’t think that a percentage move of less than 1 to 3 percent should even be considered newsworthy. Certainly 3 percent or more is worth noting… But that’s my opinion. My lively hood, unlike the TV commentators, does not depend on keeping you tuned in during the breaks to watch commercials for Ex-lax, Sham wow, or Viagra…There world revolves around that need. Please remember that fact.

I can remember a reporter asking me what I thought about one of those down days, and I told her the fact, that I had had one of my best day’s ever. She couldn’t grasp it.
She quickly ran over to one of my friends who was sitting on the step, looking like his dog had just died. That was the picture she wanted to sell to her readers…

Fast forward to one of Greenspan’s surprise rate cuts, back in the day. I was standing there short and watched the market instantly rally 250 points in my face. That was a story she would have loved to print, eh? Greedy commodity trader gets his just reward, lol… However, I also had friends that day that went to lunch long 10 contracts and made a quick 25K courtesy of that move. So, you just never know. Its all about managing the risk, or one of my mentors said to me, “tame the risk” just like a lion trainer manages his lions. With a whip and a chair, as well as a pistol…

The market goes down 3 times as fast as it goes up. Doesn’t matter if its a market for milk, butter, 1st round draft pics, Thoroughbred yearlings at Keeneland , real estate, corn, wheat, Malaysian palm oil, copper, sugar… you name it. When the bids dry up, prices drop like a mine shaft until value is found again.. Its painful, especially if you are on the wrong end, long and wrong. Very often, however, the market over corrects on a down move. People get so emotional that they sell all they own, and then sell some they don’t, anticipating further declines. This emotion marks a market bottom. We call it puking on the lows. That kind of capitulation is actually healthy for the markets.

Like the 8 year old that gorges on Halloween Candy, the 2AM puke is the best thing he or she can do to get rid of the problem. However, a year later, even with memories of the last experience, very often that kid will do the same thing again, maybe not as bad, but he will over do it. After all, its Halloween!

So, despite the “horrific 100 point drop in the Dow yesterday-Friday) I continue to believe that we will see 11000 sometime in the next 2 to 4 weeks. Will it hold? I have no idea…That’s for the Amazing Karnack and the Psychic friends network to tell you.. I will tell you that I just read a bearish report from US News and World Report, with the headline 4 things that could spark a rapid decline or something like that.. I just skimmed it on my Yahoo news… My response to that headline is …Only 4 things? lol.. Keep the bearish news coming and we will rally, quietly, creeping, creeping like ivy on the side of a building.. That’s my opinion…
When the reporters start talking about “the recovery is here…. or happy days are here again.. that’s the time to start tip toeing to the fire exit…