Saturday, September 08, 2007
Hiccup or Fart?
(Click any chart to enlarge)
We've experienced extreme market volatility over the last 6-8 weeks. The markets have recovered some, but here are my rough calculations of peak-trough decline.
The NASDAQ fell from 2,712 to 2,386 (-12%)
The Dow Jones Industrials fell from 14,000 to 12,455 (-11%)
The S&P 500 fell from 1,552 to 1,370 (-11.7%)
So there you have it, pretty much an 11-12% broad market decline. Most of the sheep blame the weakness on "subprime mortgage credit issues". Of course as the markets were ascending over the last seven years, not a soul ever said it was due to "subprime mortgage" prosperity. One will be perpetually amazed at the reasons opinion-heads attach to unquantifiable security price fluctuations.
I was short the entire way down, covered right at the bottom, and went long. One problem was, I was just making back money that I lost on the rally in July. Another problem for me was that I lost patience and dumped my long WAY too early. Then I re-established my short far too soon - as this violent retrace in the NASDAQ hammered me good.
Enough about me and my trading travails.
The important question of the day is, was this just a hiccup in the financial markets or was it a fart?
Hiccups can, and often do terminate very quickly.
Whereas a fart is mostly a premonition to a dump...
(Please pardon my imagery but literary excellence demands precise and provocative metaphors!)