Don't Be Concerned About Missing Out

Don't be afraid of missing opportunities. Behind every failure is an opportunity somebody wishes they had missed.
-- Lily Tomlin

Although dramatic credit issues are likely to continue to dominate the headlines, the market is poised for some choppy and random action. The waning days of summer and the great persistent uncertainty over macro matters lends itself to moving slowly and not making major bets. We will continue to see some volatility, but this is very likely to be a trading-range market for a while.

There are many market players now anxious to declare the recent correction over, but there is a very strong undercurrent of caution that should help keep the market contained. A lot of market players believe there is more bad news out there that is going to hit at some point, and they want to wait see if it hits. If things calm down for a while, they will then deploy their capital more aggressively.

The market action over the past week seems to indicate that optimism has been restored. However, much of it seems to be driven by the hope that the Fed is going to be cutting interest rates. The irony is that if the market continues to act like it has over the past week then there wouldn't be any need for the Fed to cut. The recent market action seems to indicate that any credit problems out there are well contained and not bleeding into the broader economy. So what do we need the Fed for?

The durable-goods and housing reports this morning are going to be particularly interesting in helping us understand the market mood. If the reports are strong, that would tend to put the Fed on hold as far as rate cuts go. If the market is being driven higher by hopes of a cut, then strong reports would be a negative. On the other hand, if we have weak reports, that will increase the likelihood of a Fed cut but it also indicates that we may be headed for a economic slowdown.

So is it better we have a weak economy and the prospect of a Fed that is cutting rates or a strong economy with the Fed on hold? The reaction to these reports will give us some indications of what the market is thinking.

I'm concerned that the action over the past week has already priced in a Fed cut to some degree and that economic news, strong or weak, is likely to garner a negative reaction. If the numbers are strong, no Fed cut, and if the numbers are weak, the cut is already priced in.

Overall, I'm not seeing the opportunity to make major moves right now. We need to be patient and not worry about missing out. We should have greatly clarity developing eventually, but for now, the potential for news surprises remains very high.

We have slightly negative action in the early going. Overseas markets were mostly down with talk about Japan taking action to prop up interest rates, which have been falling back close to zero.

None.

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James "Rev Shark" De Porre is the founder and CEO of Shark Asset Management, an SEC-registered investment advisory firm. He also operates sharkinvesting.com, an interactive online community that serves and educates active investors. De Porre holds business and law degrees from the University of Michigan, is a member of the Michigan Bar Association and a former tax attorney and CPA. He lives in Anna Maria Island, Fla., with his wife and two children.Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Rev Shark appreciates your feedback; click here to send him an email.