HAUNTING EMOTIONAL CONSEQUENCES
What started as a mild flu has officially turned into the beginning stages of a financial black plague. Looking through my various daily research points, there is literally not one thing to hang your hat on if you are bullish. All of my support areas have been broken. The most important generational trajectory of all in the Dow has been obliterated. The Facebook IPO came and went, resulting in thousands of articles, tweets and clever quips. But nothing of substance.
All of the above mentioned dark clouds hanging over each one of our heads is absolutely 1o0% necessary in order to see that elusive bottom that everyone has been searching for. But hold on one second my fellow poopy fingered, bottom pickers. Just because the worst may be close to being over doesn't mean that a future of Sunny Delight, Raisinettes and juggling clowns awaits us.
I published an important study just two days ago with respect to the velocity of fear. The study basically tells of relatively flat trading conditions with the possibility of further negative numbers over both a one month and three month trading period when fear develops as quickly as it has in recent weeks. And it makes perfect sense.
Gradual fear built up over several months has the potential to be thought through, analyzed and ultimately dismissed as the data develops. As human beings, when there is a sudden onset of extreme fear, we are less likely to perform the proper analysis or dissection of pertinent facts, simply choosing to act on emotions alone.
It is the difference between a burglar breaking into your home at 2pm, in broad daylight, while you cut carrots in the kitchen and see him crawling through your daffodils and a burglar breaking in at 4am while you are fast asleep. Both are frightening experiences. However, in the first case you have the opportunity to slowly build and analyze your fear, as well as your options, in order to come to viable conclusion as to what the best course of action will be. In the second case, the sudden spike in fear you experience will lead to more drastic and emotional decisions. Equally as important is the long-lasting emotional trauma that comes with a sudden spike in fear.
What we have now is the equivalent of the 4am burglar. The residents of the bull market have waken up and will soon have the burglar hog-tied. However, the emotional trauma resulting from such an experience will remain with them. And this is confirmed by looking at the chart of the study into the velocity of fear.
Here is the point I am attempting to convey without pulling any punches: The next few months are going to be the equivalent of attempting to bounce quarters off a monkey's ass after it has downed 14 cups of espresso. In other words, trading conditions are going to be difficult.
In situations like this, it is often best to do nothing at all. Hold onto a few uncorrelated positions and a good amount of cash, simply waiting for the right opportunity to pounce. There is no magic to this. It is a game of patience at this point.
The rest is up to you. Enjoy your weekend.
