Greed takes a holiday

I believe the best way to understand the ebb and flow of the market is to view it as the interplay of fear and greed.  Of course, economics are important, but I view human psychology as even more fundamental to the movements of the market.

Tonight fear has the upper hand.   US markets have been down two days in a row, the Asian markets are down sharply as I write, even gold is slumping.    Investors are looking at tomorrow’s markets with trepidation–do they really want to stay invested over the weekend?  Is this is the long anticipated correction people have been predicting for months?

For the first time since the 18th of December, the S&P 500 has broken through the lower bound of its trendline.  Over the last six months, this would be where I would jump in, but I think fear will spike up at least for another trading day or two.  Fear has to subside a little bit before bargain hunters start jumping in.    I’ll probably jump into USO first.  If it drops to about 36 I’ll be ready to jump back in with a covered call.

S&P 500 trendline (SPY),  click to enlarge
S&P 500 trendline (SPY), click to enlarge

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