Monday, March 17, 2008

Monday Morning Market Update

We urge our readers to sell into any strength or rallies this entire week. The financial sector's stability has been shaken and the fall out will NOT be known for several weeks. Market mechanics are different today than in the crash of 1987, 2001, and the Great Depression, which we hear some talking heads mentioning. Shame on them, and shame on Alan Greenspan for his comments this morning; we wish that man would just retire and not contribute to the conspiracy theorist psychology. The United States will get through this fine. Our readers should keep in mind the strong Euro and other strong foreign currencies, which may be the saving grace over the next several weeks and quarters. Never has the U.S. market crashed in the face of such a strong global foundation. That having been said, the Bond market must stabilize before we ask our readers to commit a single dollar into any global equity market, but especially the US. A great deal of bond trading on Wall Street would have frozen up if it weren't for Government intervention strategies/policies. We see the Government doing everything possible to avert capital melt down. In realizing that the Government is the last line of defense, we urge our readers to allow the markets to reach some equilibrium point before entering any trades, but especially on the long end. Never force trades. Some don’t agree with Government intervention, but we must accept their efforts during such climactic events. U.S. market liquidity can’t be allowed to dry up. We suspect that we’ll not see a bottom in the stock market for several quarters, but we’ll continue to offer our insights on a timely basis, as events unfold. The reverberations from the financial sector are not yet fully understood, and the underpinning of the sector is extremely important to all other sectors. Without a strong conviction in the ability of U.S. Banks to offer loans and extend credit, our readers must be patient until this psychology shifts. Traders in Chicago and NY are in shock. The market doesn't make sense to most under 45 years of age since they didn't trade their way out of the 1987 crash. I traded my way out and am witness to that crash. I actually made several mistakes that I can help you avoid. Even though the mechanics then were much different from today, our readers should remain in cash. As you see the S&P and Dow try to hold up this morning, we reiterate that you should not enter any long positions. Many hedge funds will be covering their short positions to offset their margin calls in Bear Stearns (BSC), so understand the mechanics of the volatility index (VIX) and the opportunities this creates for your trading strategies (for those who do quick intra day flips). There will be many dislocations over the next several days that make absolutely no sense to anyone, but when you’re floating on a small life raft in the middle of the Pacific Ocean, conditions are dangerous and transient.Always follow our 11 Commandments of Trading.. and thanks for reading this time sensitive Psychology of the Call.

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