Ok, so I have pretty much remained a bear all along, however…I NEVER thought something like yesterday would have happened.
What did happen? Clerical mistake? Automated Trading gone tragically wrong? Widespread fear of the EUR coming crashing down? I will be totally honest here, I have no idea.
Here is what I do know; these markets have been and are over-inflated. This “blip” that occurred yesterday may very well serve as a wake up call to a lot of people, one that screams, “We are not as SAFE as we think we are.” The recession is not over, the banking troubles will continue and jobs are still being lost at a greater rate than are added.
There are 2 motivators in the markets, fear and greed. Fear keeps money out of the markets, greed floods them with money. It is when you learn to understand what cultivates and creates these emotions that you can control your destiny within the markets.
Here is how I see it. Right now, in the markets, the rush of buying at a discount (the most recent 2008-09 lows) is over – the greed factor is waning. Investors looking back are starting to realize they are holding paper in companies that are inflated, the fear factor is building, and yesterday it made headlines. Before yesterday, questions about an over-inflated market where brushed off as “fear mongering” and “unpatriotic” now, they can be brought to light and discussed in a very serious manner. Today, I do think we will see a “dead-cat bounce” and actually make up most of what was lost, but the damage that this has done to the average, “main” street investors mind-set will eventually be crippling. Now, starts the real Bear market, a steady decline of the markets over a sustained period. We have had too much whipsawing in the past 3 years, it is time for this market to settle down and pick a direction – unfortunately the economic climate and negative political view of “Capitalism” (which, whether you like it or not, Capitalism is essential to a thriving financial market) lead me to believe that the direction it “picks” is going to be down.
Technically, the markets are just about right at the 50% Fib from the high (Oct. 2007) to the low (Mar. 2009) – this is a big area of resistance here. I have more in-depth analysis for individual markets, but overall, they are pointing down.
I have so much more that I want to say, but I need to get back to work (and my cup of coffee). I will elaborate further on individual markets in my weekly analysis that will be posted on Sunday night.