Thoughts in the Interlude

 As we wait out the stock market reaction selloff (to either the first support level of 815 or the second at 765) plus the start of earnings reports we have a few thoughts this morning.

For me the economy and the markets peaked in 2000 and the rally from 2003 to 2007 was just a bubble based on leverage and cheap money.The Obama administration is trying to quickly address the ramifications of the bursting of a number of these bubbles, real estate, stocks, commodities, primarily. For the most part they are doing the right thing, but they are creating a long-term interest rate bubble that will cause problems down the road.

In the short run however, the psychology of the market is the most important factor. The big money remains pessimistic on the market and has been pessimistic on the Obama initiatives. This has led the market to being under pressure since the election and what we are seeing right at this moment is just the beginning of the blowout of the pessimists.

At some point the market will become too optimistic and that will be the time to sell. Fundamentals to me always follow the story. i.e. Fundamentals are good to tell you which ball park you are in, they don’t tell you the strategy you should use to win the game.

As to the question one reader asked, my favorite movie ?, “Trading Places” was good and essentially true to the game, but the 1981 movie “Rollover” was more of a big picture thriller, a macro view of the markets maybe.

The EMA ETF Fund Nav was 1042 at yesterdays close.

7:58 AM CDT