Nikkei Loses 16% in 2 Days—Domestic Losses More Modest

Uncertainty surrounding the Japan natural disasters, and unknown consequences from the affected nuclear facilities, pushed the Japanese Nikkei down by over 1,000 points in early trading yesterday.

The domestic indexes followed the path down but to a lesser degree and staged a nice recovery as the chart above shows. The market reaction was based on only scant news reports but lots of rumors and assumptions. Hard facts were hard to come by, or to verify, so reaction was bound to be negative.

The enormity of the problem is truly mind boggling as the world tries to get a better handle on the nuclear crisis and its potential impact. There does not appear to be a fast solution, which means we will continue to have to live with the developments as they unfold.

Natural disasters are on things, but this triple punch consisting of a major earthquake, a deadly tsunami as well as unknown fallouts from the damaged reactors is unique. The markets will have to digest the news as it comes and all you can do as an investor is follow your strategy.

There is never a good reason to participate in panic selling, and this is no exception. If your trailing sell stops get triggered, then make your move and unwind your positions. If they don’t get triggered, stay with the major trend.

Almost lost in the news was the Fed’s announcement that the economy is on a “firmer footing.” They also said, I assume in reaction to the Japan crisis, that they will continue to buy Treasury securities to support the economy. That sounds like QE-3 is on its way; ahh, I am feeling much better.

About Ulli Niemann

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