Download Q2 2008 Market Commentary (Excerpt)

Q2 2008 Market Commentary (Excerpt)
August 27, 2008 S&P500 Index 1288
The result was an astounding and completely unprecedented 54%!! rally in the bank
stock index in ONE WEEK!, with 30% occurring in TWO DAYS! There were equally
dramatic rallies in financial company stocks and airlines and equally astounding losses
in Energy/Precious Metal and Agriculture stocks. The level of volatility that we are
seeing now on a daily basis in individual stocks and economic sectors is absolutely
unprecedented with some daily stock price movements on the same scale as what
happened during the infamous "Black Monday" stock market crash of 1987. This
unprecedented volatility is the direct result of large scale liquidation of multi-billion dollar
investments compounded by computerized trading where $50 BILLION dollars of assets
can be bought and sold with a single keystroke - all over the world - in SECONDS!
Financial/Commodity market rallies and selloffs that previously took weeks and months,
are now taking place in hours and days! The pace is simply too fast for humans to
adjust to. However, the underlying events and "fundamentals" that affect the financial
markets still play out over weeks and months, so, as a result, we have markets moving
up and down violently long before the full effect of the underlying events becomes
known. This has only added to the confusion as the largest financial institutions and
market players routinely try to "game each other" into buying or selling for reasons that
have nothing to do with their actual beliefs as to which direction the markets should be
moving.
While all this volatility has created lots of fear and confusion as everyone is caught in
"the wake" of these financial institution battles, opportunities to buy and sell are being
created constantly that are even better than ever before as frenzied institutional buying
and selling pushes prices higher and lower than they ever would have gone without the
computerized firepower. So rallies go further than make sense, and these should be
SOLD, and selloffs go lower than they should and these should be BOUGHT! This is
precisely the same strategy that I have been preaching for several years now: "Sell
rallies and Buy selloffs". With the S & P 500 at 1270 and at the same level it was in
2005 and 2000 and 1998!, the only way to have made money was to Sell rallies and
Buy selloffs for the past 11 years.
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