It was an ugly week. It was an week when there was no place to hide. I moved my account to 100% cash on Thursday. We are now in an extremely negative market environment. The Dow and the S&P both decisively undercut their January lows on Thursday on heavy volume. This was a breakout to the downside, and was followed by an even uglier day on Friday, when the S&P 500 suffered its biggest point loss since 2003. The market got hit by the one-two punch of the possibility of higher interest rates and, at the same time, potentially slower economic growth. The Fed was raising rates by a quarter point at each and every meeting, this was appropriate for quite awhile to fend off inflation, but inflation is no longer the main concern. Now it's those new signs of a slowing economy. The combination on an aggressive Fed and a slowing economy creates an extremely bearish environment for stocks.
Earnings season started in earnest last week, and, to my surprise, it so far has provided no help. I became very concerned when, after Wednesday's close, Apple Computer reported another blowout quarter, far surpassing analysts' expectations, and yet the stock immediately began to sell off. This was suggesting, good news is bad news. Then, a very disappointing report from IBM showed us that bad news is also bad news.
I am in a very secure position now, at 100% cash, to weather any further downside that may lie ahead. And I suspect there is further downside. Fear on Wall Street grew by leaps and bounds late last week, and I doubt we've seen the bottom.
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