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This Week: Slow Grind Likely

April 6, 2008 11:03 PM

The “big” news was out last week, and failed to shake the markets even though the news pointed to a rapidly weakening economy. So now what? This week’s news isn’t as important, so more of the same appears likely. Until the market finally realizes the news WILL get worse, and that reality sinks in their brains, they will refuse to sell, IMO. Most traders are somewhat convinced that we have seen the lows, and if so, the risk of selling outweighs the risk of holding or buying. The market’s are not about reality - they are about relative performance. Money managers get paid to beat their opponents - NOT to make you money. If the market loses 10% and they ONLY lose 5%, they will likely get big bonuses. That is the simple reality of Wall St.

 With that said, this is still a trader’s market, IMO. The economy is getting worse, rapidly, and hope is not something to invest in. Let others hope, take the rally’s and let the “salmon swim upstream” after. 

 The market will likely trade sideways with an upward bias until financials release earnings next week. From what I have seen, we have likely seen FAR less than half of the write-downs - but nobody knows for certain. If that is the case, a bank failure at some point is not out of the question. I have been wondering about Washington Mutual going under for some time…. If Countrywide collapsed and gave customers higher rates, in general….WM has to be under pressure, I would guess. The big drop in WM on huge volume on Friday also “smells” funny… That is why I have mentioned on several occasions that if you want to be long financials, I would STRONGLY consider an ETF to avoid the possibility that you just bought the next Bear.

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