Bears On The Prowl

Traders on Wall Street had to do an about face yesterday and take their focus off the European debt crisis for a while, as the shelling of a South Korean Island by the North Korean’s caught everyone off guard.

As if existing problems weren’t enough, the North Koreans decided it was time to get some attention and what better way than to lob a few explosives at an island that has been under dispute. I am not sure who else listened, but Wall Street certainly did, and the bears came out and pulled the markets lower. Surprisingly absent was the afternoon comeback we’ve seen so often as uncertainty kept the bulls on the sidelines.

The markets have been struggling for the past three weeks, and worries persist that the highs for the year have been made. Be that as it may, several of our positions have triggered their trailing sell stops and will be sold tomorrow.

These are obviously more volatile positions, like Country ETFs, and as announced during the pullback last week, I will watch market activity early today and, absent a nice rebound rally, I will pull the trigger on the selected holdings.

Not helping the market yesterday, were continued issues with the Irish bailout and the fear of the debt crisis not being contained. Domestically, last quarter’s GDP was revised and came in better than expected.

The Fed’s minutes from its last FOMC meeting trimmed the economic forecast for 2011 and beyond while unemployment is expected to remain stubbornly high.

Gold and bonds were two asset classes that moved higher yesterday offering a nice balance to our portfolios compared to the broad market selloff.

The U.S dollar rallied as the global investment community decided that, after the Korean story hit the wires, a flight to safety was in order. Apparently, whenever there is a major crisis and the heat is on, the dollar remains the currency to move into.

When things calm down again, I am sure sentiment will reverse, and it will become the whipping boy of choice again. Go figure…

About Ulli Niemann

Ulli Niemann is the publisher of "The ETF Bully" and is a Registered Investment Advisor. Learn more
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