Friday, June 09, 2006

Market Whiplash

Midday yesterday, the DJIA was down a whopping 170 points...then suddenly in the afternoon it did a complete turnaround and finished up nearly 8. For my own personal portfolio, this was a swing of $1000 in a matter of hours.

What was the reason? Wasn't the reported acension into heaven and subsequent servicing by celestial virgins of Zarqawi, since that was known when the market opened. The only news item that corresponds with this turnaround is Bush's announcement that the economy is better than we think it is! (Us stupid Americans, we obviously can't tell when our wallets are full or empty, we need our glorious leader to inform us that we're wealthy.)

What semi-intelligent person doesn't see through this self-serving political announcement? Has Bush ever made another type of announcement? How can people investing large sums of money in this market be less than semi-intelligent?

It's scary. Jim Cramer says it's an excess of speculation in the market, and I don't know enough to argue with him. These momentum players aren't buying stocks on fundamentals, macroeconomic or company-specific. They are simply trying to catch part of the "move", in whatever direction that move is going.

Usually action like yesterday, on high volume, is indication of a bottom. I'd like to think that's what we've seen. But with all this speculation, who can really tell? These weak holders need to get washed out for a real base to form, and there hasn't been nearly enough blood in the streets to wash them out.

So what to do? Continue to be really selective with your only companies with solid earnings as they come down, and buy small amounts. Looks like the pain is far from over.


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