What A Terrible Week

Last Friday, in my closing post, I discussed how the alternating days of strength and weakness were an indication that indecision was growing and that we might be near a turning point. I certainly didn't expect the turn to happen this quickly or suddenly.

After a bounce on Monday, we had to listen to the chest-thumping bulls once again about how this market is never going to go down. Of course, that was a classic contrary indicator and the rollover kicked in with a vengeance. Usually, market turns don't have one very clear catalyst, but in this case, the selling was clearly triggered by the sovereign debt issues in Europe. Many have been trying to dismiss the problems in Greece as a minor matter, just like they dismissed sub-prime debt as irrelevant a couple of years back, but as the old saying goes, no man is an island, and all financial affairs are interconnected these days.

And if the market wasn't already difficult enough, we had this astounding meltdown that swung the DJIA about 700 points within a hour. No one seems to be quite sure what caused the swing, but the massive instability spooked a lot of market players, who prefer to do their gambling in Las Vegas, where you know already that the game is rigged.

After the big meltdown on Thursday, the bulls had a good setup for a quick recovery bounce, but they were unable to get anything going. Many were still reeling from the action on Thursday, but the biggest problem was that there is so much uncertainty about Europe at this point. We just don't know if Greece is going to be the domino that knocks over other countries, or whether the issues will be contained, and with no answers immediately on the horizon, the smart trade is to wait on the sidelines.

The good news about this market is that we've "needed" this sort of wash out and reset for a while. Many folks have been far too early in anticipating it, but it was inevitable. Now that it has happened, it's a new ballgame. The market character has changed and we now have many new opportunities to explore and exploit. If you took some hits this week, shake them off and we'll get busy next week making it up.

Have a great weekend and Mother's Day.