Dass eine "bounce" kommt, ist keinesfalls sicher. Shark schreibt selbst, dass ein Bounce unwahrscheinlich ist, solange die Unklarheiten mit Europas Fiskalproblemen anhalten. Die neuen US-Gesetze, die Zockerbanken einschränken, sind mMn auch noch nicht "eingepreist. Watch for a Bounce, but Be Careful
By Rev Shark Street.com Contributor 5/21/2010 8:10 AM EDT Adapt or perish, now as ever, is nature's inexorable imperative. -- H.G. Wells
Widespread pressure on the market continues this morning as market players struggle with uncertainty. Although Germany has approved the $1 trillion eurozone bailout bill, there is still tremendous concern over a possible contagion. The market seems to be realizing that bailouts come at a hefty price and don't necessarily solve the deeper problems.
In addition to the mess in Europe, financial reform legislation in the U.S. is moving through Congress and market players are struggling to price in the impact it will have on the banking industry.
The bottom line is that we a lot of worry, concern and uncertainty, and buyers are staying on the sidelines. Until we know the extent of the economic problems we face in Europe, it is going to be very hard for this market to put in a good bottom.
You really don't have to understand the news to see that this market is in trouble. The major indices have all suffered tremendous technical damage and are struggling to find some support. This is the first correction since the bottom in March 2009, and it is obvious that we aren't bouncing back quickly or easily like we have done so often over the past year. There is a major change in market character, and there is no way for us to know how much deeper this pullback can go.
The good news is that we have gone down so fast and so hard that we are oversold. Conditions are good for a bounce, but that doesn't mean we should rush in and buy. Market players thought we were oversold a couple of days ago, and if they started to buy in anticipation of a relief rally, they are already sitting on a sizable loss.
As the market rallied over the last year, I often wrote about how we shouldn't try to impose our logic on the market. Many market players never could reconcile the strength on Wall Street with the weakness on Main Street, and it kept them very skeptical and underinvested. They just couldn't bring themselves to embrace a rally that didn't feel logical to them.
The illogic of the market works the other way, too. Now it is the bulls who are focusing on all the positive things that the market is overlooking. Earnings are great (naja, überwiegend Basiseffekte - A.L.) , the economy is showing signs of stabilization, Europe really isn't that important to us and so on and so forth -- these are some of the reasons being offered up to support the views that the market is acting illogically. [Europa nicht so wichtig? Ist inzwischen eine größere Handelszone als USA! Man bedenke, dass die Aktienmärkte 1998 "nur" wegen einer Staatsfinanzkrise in Russland um 20 % korrigierten, obwohl Russland nur 1 % des Welt-BIP stellt...] Market players, especially those who are positioned poorly, are always going to argue about the rationality of the market. Perhaps it makes them feel better to establish that they are "right" and the market is "wrong," but it isn't going to make them money. Our job isn't to argue with the market, but to look for ways to profit from it. Right now the market is in a free fall and our primary job is to stay out of the way and to protect our capital. Hopefully most of us are sitting on a good cash reserve at this point and waiting for trade opportunities to set up.
With the market falling apart the way it has over the past week, the vast majority of market players are going to be focused on trying to catch a market bounce. That is always the case, but we have really been conditioned by this market to do so after how successful dip-buying was over the past year. I suspect the downside pressure we are seeing now has been accelerated to a great degree by overconfident dip-buyers who suddenly found themselves trapped.
Nonetheless the focus today will be on trying to catch a bounce, and with another gap down on the way, the buyers are going to be sniffing around looking for an intraday reversal to the upside. They tried yesterday afternoon but the bounce fizzled badly in the final hour and we closed poorly.
Look for more bounce attempts today. It won't take much to get a bit of a squeeze that draws in flippers looking for some quick upside. If that is your style, then go for it, but the most important thing to keep in mind is that this market has changed character and there is now a much greater likelihood that a bounce will fail.
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