Not even 30 minutes ago, the stock market was up over 2.7% (300 points), but over the past few minutes we've dropped to under 150 points. The reason for the drop was the result of news out of Europe (of course) that the Greek financial bailout had once again hit a snag. In order for the European Union to pass a financial bailout program for Greece, all 17 member nations have to ratify the plan. As of the last vote that was taken, 10 member nations voted yes and 7 voted no...just like in Washington, politics in Europe are troublesome.
While stocks are still up on the day, what continues to concern me is the fact that investors have no sense of underlying company value or financials, but rather they trade and invest at the altar of momentum. If talking heads on tv are positive (also known as bullish) on the markets, then that causes people to want to buy. Vice Versa, if these same people are negative (also known as bearish) on the markets, then that causes people to want to sell. The problem with this? Most of the individuals on tv have told you to buy high and sell low, which as I've talked about is the opposite of what you need to do.
Don't invest or trade based on momentum or what Brian Williams might say tonight on tv. Dont get overly positive or negative on the markets until we have more direction and clarity on our economy and on the problems in Europe, stay small and buy on big down days and sell on big up days (take small profits).
Stay market neutral
