Daily Market Update – March 3, 2014 (Close)
It has been a while since there have been any international events that have influenced the markets.
In the past three years most of those events have centered around the European Union and its banking system.
This time the European Union is only indirectly involved and its banking system or impending default by one of its member nations has nothing to do with events. Instead this weekend had a feeling of the 1950s. Old nemeses are exerting their will in a manner that seems foreign to many.
Except back then the stand-off between the East and the West was long in the making and we spent our time practicing hiding underneath school desks. It has been a generation since we’ve had the slightest concern about anything going on in that part of the world.
The events between Russia and Ukraine may have been simmering for a while below our vantage point, but seem a sudden conflagration for which we weren’t prepared.
Going back a bit further in history, the pretext by which one nation invades another in order to protect an ethnic population has its counterpart in Sudentenland in the 1930s. It appears, based on the initial success of Russia in taking control in Crimea, without having fired a shot and faced only by worldwide condemnation, the next step is just as was taken more than 75 years ago, realizing that such moves can be done with impunity.
While neither the world nor the markets may like those prospects, they are limited, as was an incursion in Georgia just a few years ago. Whether justified or not, life goes on and becomes the new normal.
This morning’s market was looking for a negative opening to the week, although not as badly as one could have reasonably expected. Although there was always a chance that may have changed once the opening bell would ring, I wasn‘t likely to be rushing into any quick decisions with the cash on hand. I surprised myself, however, ultimately opening a few new positions as it was hard to imagine any kind of physical confrontation that would pull in anyone other than the direct parties. It seemed that markets would only be impacted by financial and trade considerations, including the flow and availability of oil and gas.
But if that is the case there shouldn’t be large and lasting adverse impact on US markets, so why not dip a toe in and test the waters?
Watching the morning ticker the moves in individual stocks was fairly pronounced even for the more traditional and safe positions, yet they seemed to be a better place to consider short term parking than anything else for the moment. While some Momentum positions had some potential appeal as last week ended, they suddenly have lost that appeal for now, except perhaps for the most adventurous of traders.
With cash available and suddenly more appealing prices getting ready to appear the question was simply whether what we’re seeing this morning is self-limited.
It seems that we were going through this same process just a few weeks ago as the market came upon a 7% or so loss in very quick order. As with the previous drops the most recent one was simply an opportunity to buy stocks as the time frame for the declines had consistently been so short lived.
However, as with other recent price drops the reasonable thing to do is to not rush in, at least not in a big way and instead wait for some price stability both in events and prices. There is no requirement to spend cash reserves just because they exist.
The next few days promise to be full of news, perhaps rapidly alternating between offering optimism and pessimism. The markets may reflect that kind of atmosphere,as it did in the final hour of Friday’s trading.
What may look like a great decision to enter a position may then look like an exercise in terrible timing, or the decision to wait may end up appearing as having squandered an opportunity.
While all weeks are interesting, or at least start with that potential, this one may be more than the usual.