Dow Hits Me On The Head...

FUNDAMENTAL ANALYSIS
Days like this always reminds me that the market has a mind of its own, especially with VIX at such high levels, we can expect large up and down swings frequently. The Dow dived 387.18 points in a single day today, with the most influential financial sector taking a serious hit from "renewed credit concern". So what is this "renewed credit concern"... simply a French bank's announcement that it was freezing three funds that invested in U.S. subprime mortgages. Well, that's one investment company's decision on its investment decision and that's only one out of millions of similar companies out there... why should the decision of one investment institute cast so much doubt on facts that was already there and accepted over so long? Only one answer... Panic. Panic is good though... panic is the stock market's way of kicking out those small time investors who cannot afford to lose money who will only cause widespread volatility when they panic like a herd of sheeps. More of such times should keep enough of such sheeps out of the market so that the market can grow under the wise and sensible investment of the professionals and savvy.

TECHNICAL ANALYSIS
Definitely a panic day. The Dow fell on a strong volume today with no doubt that it is a very weak day. All short term indicators shouted to the same red note today, which is also widely expected. Days like this totally nullifies the effectiveness of short term technical analysis and make us look at a longer time frame. The weekly Dow chart is still holding above the weekly 30MA, which is a critical support line. Mid term momentum indications on a weekly frame does suggest that there may be a bit more downside before a rebound right now.

All in all, I can only say that I am disappointed at how easily shaken investors can be today when I have specifically asked everyone not to panic in yesterday's comments. Sometimes, even though people are losing faith in mutual funds and want to take their own money their own hands, I must say, there are just too many out there who just aren't ready and will only cause volatility in a sensitive market... in fact, they will only make the market more sensitive to every little news. If you think you panicked today, then perhaps, or the good of the overall market and to create a more sustainable economy, you should simply buy into a mutual fund.