First off, I think yesterday's market movements put that day as one of the weirdest days I've ever seen in the markets. I think when the dust settles and I have time for trivial things, I'll make a Top 5 list of the weirdest days I've seen in the markets. I'm sure yesterdays over 1,000 point decline in the Dow, followed up by a run that pushed the market close to break even, only to be followed by a sell off to back to a decline of ONLY 500+ points will make the list. WOW!!
But, more importantly, now we are set to open this morning and Futures are pointing to a huge spike for the markets at the open. If these levels are held, the losses from yesterday will be wiped off the books.
Well, evidently yesterday the market was looking for a move by the Chinese government to stabilize their markets and they didn't get that move. So, the markets sold off big. However, last night/this morning China did cut interest rates and change banking requirements. And this morning OUR markets are set to open way higher.
Ok...what does this mean?
Frankly, to me this introduces another level of risk to the market. Well, I shouldn't say introduces it. Rather, it formally cements this fact into my brain...and hopefully the entire market's brain. We are being driven by international markets. Our economy has been expanding for quite some time. Earnings on S&P 500 companies have been very strong, for the most part. Employment in the U.S. is robust. Most of the signs of a strong economy are in place. However, when Greece had its problems our markets wobbled. Now China is causing us problems. When these two nations get their house in order, our markets respond.
This troubles me for two reasons:
1) Foreign countries fixing their problems is something that we don't have complete, if any, control over. We are dependent on them to do what is right to get their ship sailing again.
2) An action that needs to be taken by a foreign government or governing body is a win-lose situation. The foreign government will always chose one that benefits them and hurts us. It is common sense and is something any entity would do. For example, China needed to help their economy and chose to devalue its currency. This benefits their manufacturing and exporting sector and hurts our exporters. These are the kind of moves that can, and will, take place as foreign countries feel the pinch of an economic slowdown.
Bottom line, I am not sure we are in complete control of our own destiny. This is another level of risk that we need to be aware of.