We're in a Bear Market

This blog post originally appeared on RealMoney Silver on Aug. 17 at 7:48 a.m. EDT.

Sir Larry Kudlow has got it, and I genuinely admired his flexibility in his view of the new economic reality. Unfortunately, in part based on the seduction of yesterday's remarkable rip back from disaster, others have not.

Many on this site and elsewhere, including the cheering squad from CNBC who partied like it was 1999 only a month ago as the DJIA eclipsed the 14,000 level, contended that Thursday's ramp was a "psychological positive" and could be interpreted as the end of the recent swoon. They are guessing, and guessing has no role in an uncertain market.

The market's action in and of itself is only sometimes a "tell." The markets are never that easy to interpret, and the direction of short-term change in a market in chaos is simply a guess. (There is a good possibility that gamma and delta hedges coupled with short-covering might be the reason for a portion of Thursday's volatile session; then again, maybe not.) That's why I have been advising smaller-than-normal trading/investment positions.

Overnight Asian markets continued lower, suffering the largest weekly losses in 10 years. Japan bore the brunt of the decline, dropping by over 5%, the largest daily loss in seven years. Our futures, which were down by over 20 points when I arose at 2 a.m. EDT, indicate another lower opening into options expiration.