Thus we want truly to believe that the bull market continues but we are beginning to have real doubts. Certainly a correction of some very real magnitude is upon us.
We know only this: that when things go awry it is best to cut positions as swiftly as one might. As Jesse Livermore was told by a more senior mentor about a position that he, Livermore… had had in place that was causing him to lose sleep, cut back to a “sleeping” position. We have done that, and even now we find it difficult to doze off for the pain of losing 3% in one week is very real and all too evident.
All of that said, we are at a position in the equity, bond and commodity markets where the margin clerks are in control and where rationality takes a seat on the sidelines for a while. The rumors of one or two or several “funds” being forced to liquidate almost certainly will prove not to be rumors but shall prove to be fact either today or over the weekend. More such rumors will develop; some too shall prove to be the truth. The game is changing and so as Sgt. Esterhaus used to say to his men before he sent them out into the mean streets of Chicago on that great television show of years past, “Be careful out there.” So do be careful out there!