I believe John Ward will be posting today's pre-market commentary. Aloha!
Well, so much for that rally attempt. It was a loss of 4% or more for all the indexes. Small caps got hit especially hard. Volume ran hotter across board, too, except for the Nasdaq and Nasdaq 100 (though volume was still above average). Both the S&P 500 and DJIA hit new bear market lows. All in all, it was a nasty day.
Whether it’s GM’s auditors being concerned that Chapter 7 bankruptcy could be inevitable, or doubts about the viability of the banks, or doubts about the FDIC having the funds to guarantee the banks’ deposits, the news has been nothing short of dismal. After all, what happens when the fund that protects our deposits against bank insolvency is itself insolvent? Sheila Bair assured us not all that long ago that the taxpayer won't have to bail out the FDIC. Hmm, where have we heard that one before? She said banks, not the taxpayer, will pay to fund the FDIC. Yet, as I thought to myself at the time, how will that work if those banks are themselves insolvent! So, yes, it’s official: we are all trapped in a bad Kafka novel. Now, according to the Wall Street Journal, the esteemed senator from the great state of Connecticut, Christopher Dodd, is moving to allow the FDIC to “temporarily borrow as much as $500 billion from the Treasury Department.” You have to love that adverb: “temporarily.” Fire up those printing presses, boys!
Couple all this with what is going on with some of the public pension funds that are out there, which by law the states must guarantee, and you have the makings of a very hairy situation for the dollar indeed. This might explain gold’s perfect bounce off the 50dma today.
Meanwhile, the Obama administration is tackling threats head on; for example, Mad Money’s Jim Cramer. White House Press Secretary Robert Gibbs answered a question regarding comments Cramer made on the Today Show by, in essence, insulting him. But, in response to Gibbs saying that “the president has to look out for the broader economy and the broader population," Cramer, who I can’t believe I’m quoting, wrote quite correctly: “Only the people who have lifetime tenure, insured solid pensions and rent homes but own no stocks personally are unaffected. Sure that's a lot of people, but believe me, they aspire to have homes and portfolios. If we only want to help those who have no wealth to destroy, we are not helping the majority of Americans; we are not helping the broader population.”
So, given all that is going on, is it any great surprise that the American Association of Individual Investors comes out with a study that shows over 70% of its members are bearish, the highest reading since the index’s creation in 1987? They tell me these sorts of reports are good contrarian indicators, that extreme bearishness is actually bullish. If that is true, then why, even after a day like today, is the Put/Call ratio still under 1.00, according to Investor’s Business Daily? So don’t confuse bearishness for fear. Fear is what makes a bottom, not bearishness.
As we have repeated here at BigWaveTrading ad nauseam: Cash Is King! If you followed this advice, pat yourself on the back and thank your lucky stars. Take a gander at the returns of the top mutual funds, you’ll see what I mean. Think of it this way: a 0% return this past year puts you in the top echelon! And they say investing is hard….
John Ward (Author_Ego - chat room handle)
top shorts w/ TOTAL returns since purchase making me money TODAY: CETV 94% CEDC 88% IPHS 64% TITN 62% GTIV 45% CYT 78% CBU 24% MCY 42% GGB 67% BOH 36% CINF 22% POT 56% SDA 81% MANT 15% FSYS 17% AAPL 44% ARB 73% AMX 55% PG 28% MOS 53% OKE 56% LLL 38% CFR 18% RIMM 61% THG 17% CEO 37% SPG 66% RDK 38% CB 15% DV 16% WRB 22% K 26% PRGO 35% APD 51% CASY 34% AMSG 44%
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