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Waiting for the Other Shoe to Drop June 9, 2012

Posted by Tom in Thoughts.
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I hate to use a figure of speech, especially one that’s unique to the US, so pardon me while I explain.  “Waiting for the other shoe to drop” refers to someone living below another in an apartment.  It’s late at night and you hear the klunk of a shoe hitting the floor, but can’t fall asleep because you are waiting for the other shoe to drop.  Anticipation.

And that’s what it looks like with this market.  Everyone is waiting for Europe’s other shoe to fall.  Case in point is our near 2% rally this week on rumors of a bail out for Spain’s banks.  Rumors . . . that’s all it takes for money managers to try to get a jump on the market.  So let’s take a look at the charts and see if there is anything there.

chart courtesy of MetaStock; used with permission

What I see is a hard sell off, then the selling drying up.  But I don’t see much buying coming into this market either.  Note the high volume “spikes” are on the wide-spread down bars; significant selling.  Where the up bars (even the wide-spread ones) have fairly light or modest volume.  I see the market rallying on light volume; not much of a committment by the Bulls.

Looks like (nearly) everyone is waiting.  Waiting to see what happens.  In the case of Europe and the world economies, that could take a couple of years to play out.  News WILL drive this market and that’s a dangerous situation because anything could happen, good or bad.  Will the economies of the world recover or slip into recession (or worse)?  No one really knows, so for now I’m happy to be in light short positions (with the overall trend) and Cash.  There will come a time, we just have to be patient.  And sometimes that’s the hardest thing to do.

Have a good week.       ……… Tom ……….

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