The DJIA had an intraday swing of about 560 points today, which, believe or not, was the narrowest trading range all week. This wild action is obviously due to extreme emotions. On Monday they couldn't buy things fast enough, and we went up 936 points. On Wednesday, they were afraid the economy was falling into a depression, and we fell 733 points. Today we swing up and down and close relatively flat.
This technical pattern is very similar to what we saw in 1987. Eventually the volatility slowed down, and a very good trading environment emerged. I'm hopeful that will be the case again, but obviously the macroeconomic situation is quite different. We are undergoing historic changes in the banking system, and we still have no idea how much all the issues with real estate and bad debt is going to affect the health of the economy. It won't be good, but guys like Warren Buffett are saying that many are too pessimistic. We'll let the chart be our guide, and so far we have reason to be very cautiously optimistic.
We have a slew of earnings reports coming up, and it would be great if the market could shifts its focus to those and away from the macro. Individual stock picking has been pretty irrelevant lately, as the big picture concerns are the only thing that matters. The vast majority of stocks are moving in lockstep, which makes stock-picking largely irrelevant.
This volatility makes for a very tiring market. You have to watch positions like a hawk or risk being whipsawed. The good news is that we are making progress toward a better trading environment, but don't bet the farm on it quite yet.
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