US Stock Markets - The Quivering Knife

When I was young and the US stock markets were on edge, this old investment pro's advice was - "Don't touch it. It's a quivering knife. You're liable  to get cut." The old pro had learned this adage when he was young, from another old and successful investor. Which probably means the proverb has been around for over a hundred years.

What "a quivering knife" means is just that, something sharp and shaking unpredictably. Try to pick it up and you'll probably get cut, badly. For financial markets, it means try to buy stocks now and you're likely to loose money, i.e., get cut. Maybe badly.

Today everything seemed to be going fine in the US stock markets. Advancing volumes and stocks were way ahead of declines. Then in the last hour, those who bought earlier got cut. The DJIA fell almost 1% from the previous day. Almost 2% from its' interday high. Overall volume was not anemic, but it wasn't exciting either. At approximately 3:00 UTC, Asian markets overall were down almost 2%.

Is this the start of a bear market? Well, once again if you try to short stocks right now, again you may be trying to pick up a quivering knife. And likewise you may get cut badly. Like Chou En-Lai  and the French Revolution < See the article Gold and Bear Markets on this web site. >,  it may be too early to tell if a sustainable bear market has begun at this time.

Personally, Guido has his doubts. For one thing, the new 52-week highs were two to three times greater than the new lows. For another, the volatility index < VIX > really didn't move that much upward.

Tomorrow, once again, Bernanke will probably shoot his mouth off, and like a trained seal, markets will  move up when the Fed chairman speaks. < Though it never ceases to amaze people, like billionaire Jim Rogers, why anyone would pay attention to Ben. According to Mr. Rogers, Berannake has been wrong every time for the past two years.>

Some investment advisers think bond yields, particularly corporate bond yields, will indicate stock market trends. With rising rates,  the stock markets will fall. Declining rates and the stock markets will increase in price. Right now 30-year mortgage rates have been falling. Calculatedriskblog.com indicating 4.99% today, while  bankrate.com showed 5.20%. Both were national averages, and the difference probably indicates different computational methods.

However, Guido doubts that  this is much help. Candidly, I think the markets and factors that influence them, have changed so much over the last year, that all previous benchmarks have been thrown out the window. It's anyones guess what the guidelines are. The entire playing field has changed, and even the professional traders have no idea what it entirely looks like.

< What's the difference between a professional trader and an amateur. Easy. A professional is one who makes money. An amateur is one who loses. My, my, there certainly were a lot of amateurs on Wall Street last year. >

Unfortunately, Bernanke and company still think the world is the same and hasn't changed. Many old Wall Street mavens are cheering this, and continually hype that a stock market bottom occurred in March. Of course, last year they said a stock market bottom had occurred in October. I guess they have "short" term memories. < Believe me, I am very tempted to give names. >

Don't you forget my friends. And be sure to remember those lessons from the past.

"Knowing you are a fool is the first step to wisdom".  - the musical Flower Drum Song

< This article is for information purposes only. It is in no way a recommendation or investment advice. >