The markets volatility indicates a high level of uncertainty. This type of trading also takes place near market bottoms. Right now, it appears that we are undergoing some type of a retest of the lows which is very normal. Everyone seems to be hanging on 'the big bailout'.
Banks, REITS and some healthcare stocks are acting alright. New leadership right now is few and far between and that will continue to be the case until the market turns. With investor sentiment being so negative right now, and talk about a collapse of the U.S. financial system, it makes sense that we don't have a clear cut direction yet. If for some reason, the markets break down below their recent lows, then who knows how far we could fall.
Warren Buffets announced purchase of Goldman Sachs (GS) stock was welcome news this morning but it will obviously take more than that. I think if Mr. Buffet felt the whole system was about to collapse, he would be more cautious about buying into what is now Goldman Sachs, the bank.
There is a tremendous amount of cash sitting on the sidelines right now and when investors are ready to assume more risk in stocks, you could see a move to the upside that is astonishing. Hopefully, when and if this does take place, media pundits will be skeptical which will help the market even more.
Arthur Daret