It didn’t have to be this way. Could have been different, far different. Much better. But this is what we have, so we have to deal with it. Oh, I’m not going to whine about the markets today. We all understand how it operates. There is no certainty in predicting the future. You do your research and homework if you’re a fundamentalist, and review charts, patterns and statistics if you are a technician. But how do we deal with the continued macro issues plaguing this market, if not the entire world? Take your pick: Europe, China slowdowns, US debt situation, natural disasters. We can make assumptions about the outcome but frankly that is useless. We can believe the ‘right’ decisions can/will be made, but then again no guarantee of that happening. And how do you invest or trade on a decision judged either good or bad by markets? Makes for a nearly impossible positive outcome.
Been seeing many calls out there for the Endgame. Hedge fund manager Richard Lees called it TEOTWAWKI (The End Of The World As We Know It). You know how it goes; the disaster that is Europe and their sovereign debt crisis hits their banks, which spreads to US banks and kicks off a global recession unseen on any scale. Even though the evidence and facts are just not supportive of this (yet), we know if we hear it often enough then it becomes a self-fulfilling prophecy. But in this world of never-ending fear and greed, the shocks from bad news hit us like a lightning bolt.
So, as we look to the chart and technical picture it appears we’re at a crossroads (see chart below). The markets have been down seven days in a row and nary a rally has been seen. We’ve been at this crime scene before, just look at the similarities recently in August. The oversold nature of the market has truly hit an extreme rarely seen. I suspect a big move higher is just days away as this rubberband is stretched as far back as possible. I thought August and early October were bad, but clearly this recent drop is comparable. Unless you believe in these ‘doom and gloom’, armageddon scenarios then the odds seem the favor upside to come – and soon. I’ll be looking to play a bounce but with one hand on the exit door just in case.