The Stock Market...What gives?

The volatility can be easily explained, at least from a short term trading perspective. One of the "almost" hard and fast rules for investing in the market is to know the extent of institutional involvement in the stock. Generally, you don't buy a stock with less than 10% institutional participation and you really watch your ass if institutional stock ownership is more than 30%. Many gurus say you bail on any stock that has 40%. The reason for extreme caution when institutions own large portions of the outstanding stock is that these funds are a monster herd, all acting on the same technical information that will stampede out of a stock and kill you.....charts tell you when to bail and if you don't pay attention you have no right at all to complain..

The perfect example of charts tipping you off is Enron in the several weeks before it went down the tubes. The chart signals were clear as could be. Anyone who stayed in before the collapse is a moron. Anyone who stayed after the chart went through the fifty day moving average is in a vegetative state.

So what is happening now is a typical fund activity. Fund managers cannot be caught being wrong. Those that are wrong are looking for jobs instantly. That is because an "error" can cost a fund as much as a hundred million dollars. Many of them got caught when the market "suddenly" dove and they bailed out late (partially exacerbating the sell off). Now, in an effort to "make up for losses," these guys acted quickly when it appeared a bottom was in and bought the financials and techs that got them in trouble. The rising market looked like they were being saved. But, once again a bank or two has been caught with shitty loans and basically collapsed overnight. Institutions bailed.

Main warning: once again black box investing. These guys have buried their shit in an unending maze of complexities, a maze not even they understand.

I still think that if you bought a good stock several days ago you will be fine, but this sub-prime thing is like a centipede, it has a lot of legs. S&P is down 18 as I post this.