There’s no doubt that the volatility has been huge over the past several days, but today saw some of the wildest, most gut-wrenching swings we’ve seen in years. Concerns over problems at various money market funds and tight credit conditions helped push the market sharply lower this morning, but various measures to limit short-selling and rumors about a possible RTC-type solution all of the bad debt still out there triggered a wild rally that allowed the indices to recoup almost all of yesterday’s losses.
We’ll let the market tell us if this move can carry over into the end of the week, but the big question is how to navigate this kind of action. The thing to keep in mind is that those who weren’t caught leaning the wrong way at some point today were extremely lucky, plain and simple. There’s just no logic to this market right now, and emotions are the main driving force behind what is happening between the bells.
The point is that we should not be feeling inadequate right now. There’s simply no edge to be had, and these big moves don’t do anything to produce decent set-ups. We mentioned that we are taking some very quick, very small trades, but are taking things very slowly. We’ve repeated on several occasions that we are by no means worried about being fully invested at the bottom. If we have reached some sort of temporary low, then the market will present opportunities to build more substantial positions in the days and weeks ahead.