Wow....the Nikkei is crashing tonight. It's down almost 14% as I type this on top of a 6% beating the other day! The damage was rather mild for the US markets on Monday but the futures are very deep in the red tonight down 2.4% as of right now and so it will probably be ugly Tuesday...at least initially. It appears as though the cause of the panic selling is that things are taking a turn for the worse at the damaged nuclear power plant.
Some notable bears like Faber were touting Japanese stocks just recently. Talk about terrible timing. I know, I know...who could have predicted the tsunami in Japan and a possible nuclear disaster, but man, this latest call is adding insult to injury given how wrong he and the other grumps have been about the US market for several months.
These sort of one offs like what's happened to Japan is an example as to why I tend to avoid playing the ST...it's simply too random. These types of events are also the hazards of LT investing as well...you have to be willing to accept that these things can happen and deal with the ST pain that they can inflict. And if the event is extremely serious like say a nuclear attack that wipes out a large country then the market fallout could be very bad and lasting. That's just part of the game that you can't control...no different than a hockey player who gets a career ending injury because of cheap shot hit from behind that sends him head first into the boards.
So, how much of the sell-off is due to adjusting expectations lower and how much is it due to panic? I think the latter has more to do with it. It's been my experience that panic led sell-offs triggered by 1 time negative shocks like this eventually get fully retraced. Think 911. The market was closed for a few days and when it re-opened it went down hard for 1 week. But even despite the market being in the midst of a bear trend, the losses from 911 were recovered and then some a few months later. So, the question is, when does the bottom get put in? Let the market tell you. When you see a big down day initially followed by a late day reversal to the green or close to break even, that has been a reliable indicator of at least a ST bottom but I'd like to see a high put/call ratio day along with this type of reversal to get some confirmation of a bottom; especially now a days when everyone is a technician thus making any kind of chart pattern a lot less reliable than before.
Bottom line: Keep a cool head and let this shit blow over before making any moves. If you end up seeing ridiculous panic selling in some of the stocks you have on your radar then by all means take advantage of it. Otherwise, wait until you see the whites of the eyes of all those Johnny come lately bulls who were late to the party.
And by the way, don't you find it odd how gold is down $13 tonight? Just like in the panic of 2008 the true flight to safety was in the $US. Gold took a beating like everything else.
I am gonna take a huge beating on the head tomorrow as I hold some mid cap oil and gas names as well as Caterpillar. I Will watch the opening 10 - 15 minutes, usually there is some sort of a bounce with a large gap like this, but I am not definitely not counting on it. Worse thing that can happen is I take a loss on my longs and watch on the side line. It has been a good ride since last September, I was bound to give some back.
ReplyDeleteBy the way, do you notice how much bullshit is there in the media about this nuclear leakage thing? You've got people from everywhere chiming in their opinion. But at the end of the day, I am just going to listen to the market.
keep a cool head. did you buy for a trade or a long term hold? if it's the latter ask yourself, what's the long term impact of this news on these stocks? very little unless japans economy get wiped out for good by this disaster which it's quite likely not.
ReplyDeletemost oil and gas companys are making bundles of cash with oil above $60 and so any beating they take with oil dropping back to sub $97 is irrational panic selling.