Jared's Market Commentary - Everything Changed...Sorta

By Jared Rosenbaum

In case anybody has been in a coma for the last few days, there was a little incident over in Japan that has changed everything I think about the stock market. It seems like every hour a new wave is engulfing a city, or another nuclear plant is exploding. Until this whole situation gets contained, which is going to take a while, Japan's economy is going to be a complete unknown, and all of the damage will be hard to quantify.

With that said, I am amazed at how perfectly things fall into place. The market has been looking for a reason to correct and just when it seemed like it would go up forever, we started to see some cracks and then mid-week the market started to breakdown. We managed to have a small up day on Friday, but I don't believe we're out of the woods just yet. I think 1175, give or take, is the target in the short-term, which would make for a 9.5%-ish correction from where we are today. That should flush the system, account for all the potential risks of Japan, and let's not forget that there are still a few problems over in the middle east that need some resolution. Of course, we could wake up tomorrow and the market could go up 200 points, but like I said, this feels like it's finally going to happen.

My one caution (to myself as well as others) is that this market has been very defended by the bulls, so every time we see a dip there is support underneath. Any attempt to short this market has to be quick and measured, otherwise you risk getting your head chopped off. My personal game plan is to wait for the market to make a move up and then short into it (not counting existing short positions from last week), believing that an attempt to rally will fail. Again, if I am proven wrong, I will exit quickly and go back to cash. There are too many uncertainties right now to make a serious bullish bet at this time.

I am currently sitting on short positions relating to tech, as I believe it will go down faster than the S&P. I am looking at some specific names to also short, but given that any specific stock could rally in the face of death, I will probably play this move exclusively via QQQQ, SPY, or SPX. The only exceptions might...MIGHT...be GOOG or AAPL, only because they tend to make huge moves quickly. As I mentioned before, I have a list of names I want to be long, and should we be lucky enough to see the S&P under 1200, I am planning to initiate positions in many of them. The reality is that the US economy should not be that impacted by Japan; however there are implications of what will happen to the dollar, commodities, other markets, etc., that could have influence as well. If you are not looking to stab at short-term trades, it's probably best to sit and wait. Panicking and selling could mean missing an opportunity (and long-term still looks ok) and buying right now is a little early with all the issues on the table. For me, this is a trade-only market..."investing" will have to wait.

I will be watching one key earnings report this week: FedEx (NYSE: FDX). They announce on Thursday and had already lowered guidance for the quarter back in February (bad weather and higher fuel). The stock is sitting around $90 and has two options: It can go back under $80, in which case I will be more concerned about our economy; or the stock can go back above it's recent high ($98), over $100, and onto $105-110, in which case everything else should be peachy. They alone are not a barometer of economic activity, but I do think there is something to be said for seeing what they have to say.

Bottom line is that Japan is creating all sorts of uncertainty and any guess at what is going to happen is just that, a guess. It's a great time to think short-term due to the increased volatility, so hopefully the opportunities setup right and allow for some quick profits. Always remember, out of adversity comes opportunity.

Jared

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