Markets Continue to React Negatively to Uncertainty

This is being written on March 5, at 3:15 p.m. ET, as the Dow continues its downward glide/slide to approach the 6,500 mark we envisioned just days ago.

This writer has been investing, trading, and writing about the markets for over two decades, and has always refrained from including political remarks in his comments.

Today, in the face of our current situation, that policy is being jettisoned. It is this writer’s humble belief that while the current market situation was conceived, birthed, and nurtured during a Republican administration, it is now fear- - - fear of the changes promised us by President Obama that is keeping the market from stabilizing.

On March 4, the market rose 149 points, not totally unexpected after 5 consecutive down days. How much of this rise was due to euphoria, or to the averaging-down disciples, or to the Fed/Treasury Plunge Protection Team is anyone’s guess.

What should be clear to all investors today is the fact that this market still has a long way to fall. We do not expect it to bottom until the general public comes to a full and complete understanding of just how much “nationalization” our industries and society will suffer. (If “suffer” is too pejorative, substitute “incur” or “be blessed with”).

In the face of such a major uncertainty, (be reminded that markets do not like uncertainty) investors should be prepared to take money off the table on any advances, and to re-invest only when a floor has finally been established.

Though we made an earlier prediction of the Dow hitting 6,500, it was not expected to arrive so soon. On Feb 6, it closed at 8,280. Thursday it tested the 6,500 level with a low of 6,546. Having dropped some 20% in just 18 days of trading, now we will not even venture a guess as to what the number will be by the time the fat lady has finally sung.

The future is not bright. There is more turbulence to come. We urge all investors to protect the capital they have left. Use the E-zone System to move to cash when the moment permits. Those who are more risk-oriented might want to restore lost capital by swing-trading a contra like SDS, the double-short S&P 500 ETF.

We remain convinced that the underlying strength and wisdom of our society, which has produced untold wealth in ideas as well as money, will eventually prevail. We just do not know when it will begin to function again. Thus these reluctant words of caution.

Disclosure: Long SDS

Comments

[morph366:]

Not being a subscriber to your service, and after such a generous free plug from SA, will you let us know when the E-Zone System tells you to exit your long position in SDS?

Mar 06 05:21 AM

[ArkansasAngie:]

Gee ... that's the problem with uncertanty -- it's not predictable.

Today, markets are uncertain because: 1) we don't know how bad things are/will get financially and 2) we don't know what politicians are going to do.

If you haven't written your Representatives and Senators, I suggest you do.

Mar 06 06:58 AM

[plumstupid:]

Third paragraph is pretty much on target. I'd add that fear of change in this instance means fear that not quite as much will be going to the Banksters as they feel entitled to.

The last paragraph, while reassuring to the true believer flag wavers is apparently inaccurate as those $8.5 Trillion Bankster bailouts attest.

Mar 06 07:03 AM

[squark62:]

dear author: Shakespeare wrote "All the world's a stage, And all the men and women merely players." economic times like this really tests what kind of player (or character) you are. character as an adjective is the description of the result of this test on your role in the play. all the covers come off and all the facades go away and then we see your face. will you have a face of a wise person or a fool? will you have the face of a warrior or a coward? make no mistake, it's not the character of others that's at stake, it's yours. no need to keep going against the grain, just take it all off.

Mar 06 01:22 PM

[cash:]

Lack of confidence is a big part. Confidence will return when people are held accountable for their misdeeds, and rewarded for good judgement. None of that is evident. Quite the opposite. The hard working prudent are being taxed, while the Madoff types live in their mansions, and banksters get bailed out. There is no reason for investors to put money into this market. Buy some guns & ammo for the upcoming crime spree. Protect yourself & your family.

Mar 06 01:51 PM

[OldLimey:]

No, it isn't the uncertainty that's killing this market - it's the certainty. If the known, certain facts weren't so horrendous we'd worry less about what is unknown or uncertain.

Mar 06 02:49 PM