Are We In the Eye of the Storm?

Well it's about time for our correction, we need a break in the market. The market has gone too far too fast, and we are due for a correction. There are really only two ways for this to happen. Either we will see a few weeks of up and down movements without much shift from where we are now (down to 9,400 for the DOW and then back up again near 9,900), or the other option is to have a quick drop in the next several weeks that will bring the market down into the low 9,000 range.

We are currently in the midst of recovery, but there is little progress on the future of the economic state. We have no answer on unemployment, we have no answer on the budget deficit, and we have no answer as to where growth will come from. Services account for approximately 70% of GDP (that's a lot!!) which means we produce very little domestically. A weak dollar does help secure some domestic production, as this means our goods are less expensive to foreginers, however, there are not immediate answers at this point on where such needed growth could come from.

For these reasons, it would not be reasonable to assume we will have a strong recovery. Until we solve these long term problems we are looking at a very long recovery, and I think what we were facing was a potential depression (yes I said it, we were very close to a depression) and I am still not quite sure the word should be swept off the table. While there is not a concrete definition of what classifies a depression vs. a recession. After facing the longest recession in history, and continuing to endure high unemployment rates for some time, I am calling this a depression.

With a storm still on the horizon I am saying it is still not safe to venture into the market, and if you do, use options as protection because this is only the eye of the storm!