Reflex Rally?
Research for Online Investors

by John Dalt

8/9/11

London is besieged by rioting for the last three evenings following the shooting of Mark Duggan during an arrest.  There was a peaceful protest in the Tottenham neighborhood Saturday night.  The crowd became unruly.  This gave teenagers and other near-do-wells an excuse to riot, burn and vandalize businesses and vehicles.  Over 370 people have been arrested, with more than 16,000 police now called out to control the evening crowds.

The British parliament has been called back into session to address the unrest.  Police are circulating pictures taken from closed circuit TV cameras in the area to identify and arrest looters.  In an eerie imitation of the protests in Egypt, rioters are using Blackberries to co-ordinate attacks on neighborhoods that have low police presence.  Instant messages on Blackberries are not traceable as they are on Twitter.

The market is up this morning.  I explained to my wife this morning what a reflex rally was.  Everything was going along swimmingly until the FOMC statement at the conclusion of their meeting in Washington, D.C.  The market was hoping against hope for another round of quantitative easing.  We didn’t get it.  The Fed replaced the use of “extended period of time” for low Federal Funds interest rates with “through mid 2013.”

This actual date (that can be changed) initially disappointed the market, but after a drop of 200 points on the Dow, we reversed and went higher.  Interest rates fell hard, erasing the spread on issues out for three years.

The market has, is, will cause you great harm if you are not careful (as evidenced by the mailbag).  We think it is too soon to declare all clear on the sell off from yesterday.  The market is still oversold.  Enjoy the enthusiasm.  Sell something for a gain if you get a chance.

It appears many who sold into the panic yesterday are buying in a panic today.

The mailbag:
Last week the markets were unkind followed by the US credit downgrade.  I wanted to cover my bases for market possibilities on Monday.  One old and dull box cutter and a new, nice & sharp single-edge blade were placed between keyboard and monitor.  The regular hours US market is closed but the after-market has moved the razor blade to front-side of keyboard.  As I type this I am having problems discerning the difference between RED INK and the REDspurting from my left wrist.  I want to watch things unfold so have placed a "very tight armband above the lrf..---Long Term subscriber D.M.

John’s reply:  Don’t do it buddy…who will feed your pets?

The information presented in this newsletter is based on generally available news releases, corporate filings, current events, interviews and the editor’s opinions.  It may contain errors and you should not make investment decisions based solely on what you believe you have read here.  Do your own research, it is your money.  If you lose it, it is your responsibility, not ours or your grandmothers!  The editor may or may not have a position in any securities discussed.  The editor may have held a position in a security earlier, or in the future.

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