As I suspected, the market did the old pop and drop over the past 2 days, and gave back all, and then some yesterday, of what was gained the day before. So much for the euphoria surrounding the Fannie/Freddie bailout announcement.
Contributing greatly to the weakness in the financial sector was Lehman’s drop of 45% in share price value after it become known that their capital hunting efforts around the world to shore up their balance sheet may have come to an end as a Korean bank backed away from a deal.
The question in my mind is now whether Lehman is big enough to be bailed out and then WaMu, followed by who knows. When will it end? Companies that are no longer a viable businesses entity should be allowed to fail as is customary and healthy in any capitalistic society.
Yesterday’s sharp retreat was a disappointment for many investors who had hoped that a turn-around maybe close at hand. On the contrary, we actually slipped deeper into bear territory with our Domestic Trend Tracking Index (TTI) now having dropped -3.44% below its long term trend line while the International TTI has dropped -10.73% below its own divider between the bullish and bearish zone.
Being on the sidelines remains the best course of action.