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.