Looking at Fear

Here is the chart of yesterday's market action. There are a number of interesting things to point out. First, unlike Monday's relentless sell-off, which started at the open and continued throughout the day, here w had an opening rally. The DOW was up 50 or so points. The rally couldn't hold and so we had a sell off down to the minus 130 level. And that level held for pretty much the rest of the day. There was anxiety, but I didn't see uncontrolled fear and panic during the day.

Then, according to Paul Kangas of The Nightly Business Report, we had several huge sell programs that triggered. Once the market broke through the interim low, the underlying sense of anxiety took hold and fear reasserted itself.

But for the majority of the day, it appeared as if traders were trying to control their fear and to analyze the situation. That's why the market played in a range. Now I know that saying it's all just due to fear is simplistic. There are real problems underlying the market's uncertainty. But you can see how you can look at market action and how you can try to infer what the underlying mood of the market is. Cautiously optimistic (opening hour) giving way to the base level of fear and then stabilizing as everyone collectively says, "Wait a minute. Let's think this through." Finally, we have a trigger that take the markets south and the underlying mood of uncertainty gives way to fear, and then panic.

BTW. The first and last hours of the trading day, if you are a day trader, have been very rewarding as those are when the really big moves seem to occur.

p.s. Friday afternoon is usually a poor time to look for a rally, unless you're in a raging Bull Market