You would think based on all the chatter this morning (the morning after Operation Twist was announced) that the financial world was about to enter an epic meltdown trading session. I have read posts this morning talking of doomsday scenarios along the lines of post 9/11 and post-Lehman collapse circa 2008. In taking a quick glance at my favorite forex market indicator, I’m on the calamity band-wagon.
We Don’t Know from Where the Smell of Death Rises, Yet the Vultures Circle
It isn’t very often I go to my secret forex market chart and look and see as clear and unambiguous a riskoff sign as I am seeing this morning. Now it’s fair to say that pre-market signals are not as relevant to the actual close as open market signals, but it’s clear today will open with a MASSIVE gap down. Given the lack of participants generally in the market it remains to be seen where the floor is. If history of market collapses are any indicator, it still may be weeks or months before we see a bottom.
Do We Buy the Dips Today?
I suppose if you found an absolute steal on a stock today which you’ve long wanted to own you may get your price today, but I have to believe the market is going to shove prices down further until financial firms start breaking. All the headline names are in the cross fire today: Goldman Sachs, JP Morgan, Bank of America, Morgan Stanley, Wells Fargo. Personally I have no insight as to what risks these financial heavy-weights have relative to just general market exposure. I can’t make myself believe they weren’t prepared enough in advance by Chairman Bernanke’s Jackson Hole speech in August. I mean heck, we all knew this was coming… so why should financials be cratering in the aftermath? One would expect they would have been reducing exposure for the last month +/-… I mean isn’t that what we were seeing in the CDS activity on French Banks and other Eurozone financials?
Seems to me the answer is no, don’t buy the dips today. Watch those who do and then go dumpster-diving after their dead cat bounces off the table and into the circular file.
Whelp… a last quick look at the riskoff indicator and it’s showing no change. We’ll see you at the close… it’s gonna be an ugly open.