What Columnbus was thinking in 1492 before his first voyage to find Asia? Faith, of course, that probably is the only thing he had. On the surface, a personality like his probably will not last long in trading because he took too much risk. However, if you look deep, you may conclude that the biggest winners in the wall street are the contraians, you have to be different from what the majorities are doing, otherwise, you will end up just average.
In that regard, let's try to make a case for the Bull :) no, seriously.
The trigger for the Friday's sell off was due to the news that the bail out plan for bond insurer was not adequent enough. Since this is just too important an issue for the wall street financial institutions, you can be rest assured that those banks will do all they can to reach some understanding with rating agency. Maybe we will hear something early next week on this, and that could assuage some of the fear of the market.
It is hard to believe, but the market has gone up 3 weeks in a row before last week. So, some sort of profit taking is understood especially in this volatile enviroment. However, Too many babies were throw out with the bath water. It is easier for people to sell when their account was up, and I am sure that psychology definitely helped on Friday's sell off.
Even though the 300+ points drop is one of the biggest drops, the volumn was no where near Juanary, it may indicate some residual momentum or it shows there are anxieties but not the panic.
Technically speaking, we are closer to the technical lows set in January, but we have not broken the band that the market has been trading in, so, it is conceiable that we could see some rebounds after the big sell off to maintain the band.
Weeks leading to the FOMC meeting always result in the positive returns, as the days leading the Chairman Ben's public speech like last week. So, maybe that alone could sway some of the momentum to the Bull's side.
Next week, we will have a barrage of economic news starting with Monday's ISM report. right now, the market has a very low expectations on almost all of them, so, any "revised" positive news could force "short" to cover since this has been a news driven market.
I always wondered what is the contingency plan of Columbus, what if the world were flat as many believed at that time, what he would do if he reached edge of the world.. Good thing that he needed not such plan because he were right. And hopefully, the bull need no such plan either..
Have a good week
