Tuesday, March 15, 2011

"No Shaking, No Tenderizing, Down You Go"

Crazy enough day for everyone? It's only Tuesday.

"No Shaking, No Tenderizing, Down You Go"
There are three parts to the story today in regards to markets and things economic.

The first part was the 'make you puke if you are long' morning open, which was pretty nasty and was sure to have triggered plenty of sell calls first thing. This needs no real coverage. For about 30 minutes this morning it as just like back in the days of Lehman Brothers.

The second part is more the part I want to spend time on because if I am right this could get ugly pretty quick.

After the terrible open, stocks caught a bid all day and moved steadily up to the day's end. Please note that I closed my positions in GG, NGD, and KCG around 3pm for bad losses, but not terrifying ones. The indices closed lower, but it was not as bad as it was. The volume involved on the upside was dwarfed by that of the selling in the morning, but that is pretty common in this market. Many observer's were watching the action and were amazed. Trader Mark offered:
While we have to wait until the major averages get back over their respective 50 day moving averages to feel more comfortable it appears nothing short of aliens invading will cause speculators not to believe in The Bernank. Natural disasters are now clearly bullish because it means rebuilding.
I left the following comment:
I think an alien invasion would be bullish due to all the new technologies we would be exposed to :)

It was just like at Camp Mohawk in the film "Meatballs"! All of a sudden all the problems of Japan and a market collapse just didn't matter! II JUST DOESN'T MATTER!:

A late day selling deluge was the warning that caught my eye and makes up act three of the day.

For quite some time people have been conditioned to buy the dip, or BTFD. Most pull backs have been benign in nature so this has worked well. The action today seemed to be a mass dumping followed by a baby walk up to attract Pavlov conditioned buyers, and then a hammer at days end. As of now futures are ugly and there may be another big dump at the open tomorrow.

This made me think of the line from the film "Jaws":
"No Shaking, No Tenderizing, Down You Go"

No one can possibly have any idea how the Japan disaster will play out. No one. Many argue this or that, but it is far from clear. I will go out on a limb and predict that Japan will not be getting to work rebuilding the region on a grand scale by this Thursday. Long term issues are not even on the radar right now.

The markets were damaged again on a technical basis and that coupled with how the selling is being done is reason for caution here. The perfect setup for distribution to BTFD chumps is in place, and I do not mean the good kind of distribution. I mean like wash out coming distribution. I could be wrong.

Have a good night.


TomOfTheNorth said...

Well said connected!

getyourselfconnected said...

Wow, Hi Tom! How have you been?

watchtower said...

And to think that I was feeling optimistic a couple of weeks ago.

In reference to the last post's social media link I would like to say this:
I don't see a problem with facebook or twitter or whatever (blogging?) as long as a person keeps it in perspective.
Problem is, I see a lot of the younger generation whose minds are occupied throughout the day with texting, facebooking, gaming, etc.
Maybe I'm wrong but this seems to go on nonstop.

While coming back home on the plane last week I was sitting by a younger person who had a movie playing on his personal computer and a game of solitaire on his Iphone(?).
He was playing the movie 'Gone in 60 Seconds' and I would have spoken to him after the film was over (to see if he might have been a car guy and wanted to talk 'cars') but damned if I could because he played the card game till the plane landed.
Mental masturbation I tell ya.

I'm no Luddite but sometimes a person would do himself a favor by just closing his eyes and letting his mind have a breather.

GawainsGhost said...

GYC, I'm going to recommend another book for you, Chaos by James Gleick.

It's a fascinating read. It tells the story of how a new science developed around a new way of thinking about chaos. What appears to be disorder actually conforms to a deep underlying order.

The essence of chaos theory is the Butterfly Effect. The weather is a complex, dynamic system. The single flap of a butterfly's wings causes a tiny perturbation in the atmosphere that cascades throughout the system, ultimately resulting in a thunder storm on the other side of the planet.

It's a difficult concept to grasp, but it is real. In a complex system, which is self-organizing, the slightest change in the intitial conditions will have a major effect on the system as a whole. It may self-organize into a new system, or the whole system may collapse.

You're right. No one knows how this catastrophe in Japan, which just keeps getting worse, will play out. But I do know that this was not a tiny perturbation, a slight change in the intitial conditions. This was a major event that crippled one of the largest economies in the world.

As the effects cascade throughout the global economy, the consequences could be dire.

TomOfTheNorth said...

Doing fine connected - just waiting for winter to end here.....