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Patience Will Be the Virtue of the Week

Other factors combining with the resumption of trading make it a good time to sit tight.
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SAN FRANCISCO -- The stock market is scheduled to get back to business Monday, less than a week after tragedy struck Wall Street's literal and figurative heart and soul.

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The resumption of trading is going to take a tremendous effort for all involved, both logistically and emotionally. But it will also prove comforting to some as a symbol of a return to some semblance of normalcy -- even if it's a long time before things return to normal, if they ever do.

As reported Friday, expectations are rising that liquidity injections -- and/or actual policy easing -- by the Federal Reserve, the loosening of corporate buyback restrictions by the Securities and Exchange Commission, and a sense of patriotism among investors and traders will buoy stocks Monday, or at least restrain the downside.

However, there's still a substantial risk investors won't find much comfort when stocks reopen. Friday's selloff in European equities, accompanied by a decline in the dollar and rally in defensive instruments such as U.S. Treasuries and gold had many reassessing the possibility of steep losses when trading resumes here. Such concerns were exacerbated by profit warnings Friday by General Electric (GE) - Get General Electric Company Report, which cited $400 million in losses at its reinsurance business, and Ford (F) - Get Ford Motor Company Report, which cited parts shortages because of travel restrictions.

While it's impossible to accurately predict how trading will unfold, "it's a safe guess that it will be volatile," as Charles Schwab wrote Thursday on his firm's Web site.

As with many who advise retail clients, Mr. Schwab recommended investors mainly sit tight for now, and reaffirmed his faith in the market's long-term prospects. "Placing orders in a hasty or unconsidered way can be very risky," he wrote. "We can say with certainty that the extraordinary and tragic events of Sept. 11 won't dictate market behavior over the long term. Over time, economic fundamentals will have much greater bearing on stock prices than the acts of terrorists."

Brian Belski, fundamental market strategist at U.S. Piper Jaffray in Minneapolis, Minn., deals mainly with institutional clients. Still, he struck a similar tone as Schwab in a note on Friday.

"More than ever, investors should remain calm and disciplined in their approach to investing over the next several weeks, as the potential for overreaction is high," Belski wrote. "Most decisions made in a panic tend not to be correct."

Certainly, the past 18 months have unmasked concepts such as "buy and hold" and "long-term investing" as mere bull market mottos. But the idea that those who aren't compelled by job description to trade should sit tight makes sense, at least until some discernible trend emerges.

Consider how emotionally debilitating it will be if purchases made early Monday for patriotic (or less altruistic) reasons are soon underwater. Indeed, some predict the market's fate will be to quickly retreat if it manages to rally when trading resumes.

(More) Complicating Factors

As if there isn't already enough uncertainty about how trading will unfold (both in practical and price terms), at least two other developments further cloud the outlook. First, this coming Friday is the quarterly expiration of stock and index options and index futures, also known as "triple-witching."

Friday, the Options Clearing Corporation (OCC) confirmed that the expiration for equity, index and treasury/interest rate options remains unchanged. A

Chicago Board of Trade

spokesman said Friday he was "not aware of any changes" to the scheduled expiration of

Dow Jones Industrial Average

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contracts which trade at the CBOT. (The OCC handles clearing for and is jointly owned by the

American Stock Exchange


Chicago Board Options Exchange


International Securities Exchange


Pacific Exchange


Philadelphia Stock Exchange

. If the AMEX trading floor -- located less than two blocks from the World Trade Center disaster site -- isn't operational, other exchanges, most likely the Philadelphia Exchange, will handle AMEX trades,

The Wall Street Journal

reported. )

Second, Rosh Hashana, the Jewish New Year, begins Monday evening at sundown. Although the extraordinary events of Sept. 11 may change some plans, Wall Street's Jewish constituency would traditionally take off Tuesday in observance, and some Wednesday as well.


the terrorists wanted to really screw up our international financial system, they couldn't have picked a better time with the markets just holding by a thread above multi-year lows, the economy in such turmoil, expiration around the corner, and the Jewish holiday," Harry Schiller of said on Friday.

But as has been the case for a while now, Schiller doesn't recommend investors sell anything into any declines, save for one thing: He believes premiums on

S&P 100


puts will be "astronomical" Monday morning. "If you own 'em, it's probably time to get out," Schiller said.

Rising put premiums presuppose a big downturn Monday morning, which brings us back to a welcome aspect of trading's resumption: An end to the speculation of what


happen by yours truly included.

Aaron L. Task writes daily for In keeping with TSC's editorial policy, he doesn't own or short individual stocks, although he owns stock in He also doesn't invest in hedge funds or other private investment partnerships. He invites you to send your feedback to

Aaron L. Task.