Quick Market Touch

by Dan August 18, 2011 9:27 am • Commentary

Oh well, with the S&P futures down 2.5% as I write at 9:20am lead by the usual concerns out of Europe focused on sovereign debt, bank capital ratios etc etc……. the DAX as expected is the hardest hit major index approaching the lows of the day down almost a whopping 5%.

For those of you who thought it was safe to go back in the water think again, this action is bad to say the least, the rally from the bottom was on very light volume and those who are inclined to preserve capital as we approach greater fears of a double dip will be tripping over those who recently added to positions and will be puking out at levels where they just bought last week……

If you are a mutual or hedge fund manager the margin for error at this stage of the year is getting increasingly thin, and those who levered up in the last couple weeks in an effort to chase performance might have just put the nail in their coffin if we got back and test the lows from last Monday…..

Oh and don’t rule out a flash crash, as the market neared panic last week with VIX shy of 50, we really didn’t have a capitulation, this has to happen before we can really bottom….when i mean capitulation, I mean stocks spread $4 wide and skipping $2 at time as specialists and market makers widen spreads in utter fear…..also you will want to see bid wanted situations which have seemed to be lacking on a relative basis to other bottoms from previous crisis that I have observed during my career.

So not trying to put too fine a point on this but in the near term we are screwed and FED heads Plosser and Fisher (also 2 of the 3 dissenters at the last FOMC meeting) as quoted by Bloomberg yesterday told you all you need to know about your stock portfolio performance in the coming months, maybe years:

Philadelphia Fed President Charles Plosser said in an interview yesterday that taking action after stocks tumbled “signaled that we are in the business of supporting the stock
market.” Richard Fisher, the Dallas Fed chief, said in a speech that the Fed “should never enact such asymmetric policies to protect stock market traders and investors.” Both also said the policy won’t help spur growth.

SO I know this is getting a little boring but I remain cautious and urge readers to be defensive and preserve capital, live to fight another day, this thing is not gonna V bottom until we have some structural changes in place to fix long term problems both here and in Europe and the volatility that we have seen of late is a clear result of our govt and policy makers inability to tackle such problems…..