Monday, March 30, 2009

Bears Win - or do they?

Today's column was very difficult to write and my Editors jumped on my "on the other hand" tone. One asked me to take one side or the other, which I found very unnerving. The evidence did not support taking one side and discarding the other. It is mixed - period.

But with support broken and a trendline broken things look dicey. More than the chart breaks, the government stepping in to ask a CEO to step down made a lot of the financial service community nervous. They were already coming after us with the transaction tax. What would be next? Would they force so much regulation on innocent traders - and yes they are the majority - that it would force them to revamp their entire business model?

Here is a quote from the esteemed John Bollinger from a chat room today:

"The current administration apparently knows no bounds and we are dead in its sights. The
environment we have known is history and the future is looking increasingly hostile. All of us, no matter how large or small, must prepare for the worst. I would suggest that each and every one of you consider what the impacts might be, how to resist and, if unsuccessful, how to survive; a transaction tax may be the least of the changes we face."

I do not take this as a political statement and in that chat room and this blog politics have no place. Rather, it is more of a military statement saying that rules of engagement are about to be changed.

Anyway, I digress. The point to be made is that Wall Street is under attack - some of it absolutely deserved - but much of it is not. And if this is the case then the financial sector remains doomed to comatose existence - and with it the market.

The late recovery Monday got me thinking this decline was a shakeout of weak hands. But the more I think about it the more I realize that we have slipped back into the highly volatile, highly emotional and highly fragile environment of a month ago.

That does not mean stocks won't go up a bit. But for swing traders like me, it is probably time to stay in any trade no more than a day or two.

4 comments:

paulocuana said...

I'm not surprised that your "Editors jumped on (your) "on the other hand" tone."
Compare this weeks articles by Gene Epstein and Alan Abelson. Gene takes a strong position that the end of the recession is near and Alan rips his data as being positive only due to seasonal adjustments.
Apparently a strong opinion is more important than weighing the variables.
I'm glad you mention Carl Swenlin. He just presents the pros and cons and lets the reader decide; much like your article today. Very refreshing.

Gabriel said...

So, after two trading days, things are no longer looking better?

plainO said...

The reason I enjoy reading your newsletter is that you do present both sides. There is too much FREE emotional ranting as it is. Abelson is an occasional read if I am in the mood - but it is very caustic --so much so, that I find I don't trust his judgement. Don't stop doing what you're doing.

Quick Takes Pro said...

Thanks for the support.

While demand for stocks is back after a one-day hiatus - and it does look as if there is a little more upside - I do not take back what I said about the fragile market and last month's instability returning. This is manic behavior and I would not be surprised to see more whipsaws. Don;t forget that volume yesterday was anemic and today it is actually lower (hour by hour as of 3:17 eastern).

Yes, I was too bearish yesterday. But I can produce an email where my editor said, "so you are saying that this is a correction in the bear market rally?"

That is what I get for caving to pressure to "take a stand." It is my fault and nobody else's.