Did you notice it yesterday morning? I sure did.
The sun was shining just a little bit brighter, the birds were chirping just a little bit louder and the wind was blowing just a little bit gentler. I felt calm and relaxed and assured that the world is now a better place. Strange feelings indeed, and then I realized what caused them: We now have a new stimulus package and all troubles are over.
Yeah right! It was only a dream.
Wall Street had no uncertain feelings as the deadly duo, the bank rescue plan along with the Senate’s approval of a huge stimulus bill, hit a brick wall and sent the bulls scrambling for cover. When all was said and done, the major indexes had lost 4% to 5% on the day, which wiped out just about all of February’s gains.
This sell-off can now almost be considered a reliable indicator as the markets reacted to the latest attempt to stabilize the economy the same way as they did the last eight times the government unveiled ideas to stem the crisis. Could there be a message here? Maybe doing nothing would be a better and cheaper option and would allow the markets to sort out things for themselves with the weak and insolvent companies falling by the wayside and the strong being able to utilize new opportunities.
For more on this insanity you might want to read Mish Shedlock’s article “Insanity Prevails.”
Just as you thought the markets were making some headway to the upside, a reality check pushed the major indexes back deeper into bear market territory. This is why my suggestion still holds that you always need to work with a sell stop should you have the overriding itch to engage in bottom fishing.
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