Clawing Back

The last three trading days provided a lot of market excitement but no clear direction. Friday, the major indexes closed down sharply, Tuesday they closed up sharply, and Wednesday all of Tuesday’s gains and then some evaporated again.

It could have been a lot worse had it not been for some serious clawing back starting at half time. One of the culprits causing this pullback after Tuesday’s euphoric rally was China as it was reported that banks were asked to stop issuing new loans for the remainder of this month due to not meeting regulatory capital requirements.

IBM contributed some 29 points for the loss on the Dow as some investors simply had hoped for even better results. Sometimes, better than expected first quarter numbers are just not satisfactory.

One of the few bright spots was the dollar, which rallied sharply. This supports my long-held view that whenever worldwide uncertainty appears, the favorite whipping boy, the U.S dollar, is the beneficiary. I see no reason why that should not continue.

While the direction of the long-term trend remains intact, short-term we may be facing more rough patches, and it remains to be seen as to whether the path of least resistance will be to the downside.