Börsipäev 27. juuni

27.06.2005 16:22

Rev Shark:

Shhh, the Market's Speaking...
6/27/05 8:22 AM ET

Marge: You aren't even listening to me. You're only hearing what you want to hear.
Homer: Thanks honey! I'd love a pork chop right about now!

-- The Simpsons

The market often sends very clear messages, yet investors hear only what they want to hear. The message that the market delivered last week was that oil matters and that the recent rally is running out of steam.

A lot of folks will look for a reason that oil is not important. They will tell us the market is not highly correlated to oil prices and that because it didn't matter that much at $56 a barrel it won't matter that much at $60 a barrel.

Unfortunately, that is not the way the market works. Something may be completely unimportant one day but be a market mover the next. The action in the indices will help tell us what really matters but that requires we stay objective and not try to impose our hopes and desires on what is happening.

The action on Thursday and Friday did significant technical damage to the market, with key support levels and trend lines broken. The bears now clearly have the advantage and we can't just shrug that off as an irrelevancy or a temporary detour. There was a change in the character of the market, and that must be respected.

If you are still heavily long it can be very difficult to be objective about what is happening in the market. We have a natural tendency to look for reasons to support the positions we are holding. We don't want to admit that we are poorly positioned and likely to take a hit. Many of us will only do that when the pain becomes too great to bear and by then the losses are severe.

If you find yourself in that position it is imperative that you work hard to cultivate an objective viewpoint. Think in terms of what you need to do to protect your capital rather than miss out on potential gains. Listen to what the market is saying and ignore the inclination to hope and dream.

We have a very tricky week coming up. The FOMC is on tap with another interest rate hike, the end of the second quarter is upon us and the Independence Day holiday is beckoning. In addition, crude oil is hitting record highs, and we have the unwinding of the Russell Index rebalancing that took place on Friday and a market with some technical problems.

In the early going this morning we have a negative bias. Overseas markets are weak, crude oil hit $60.64 and gold is down slightly to $440.

Gary B. Smith: