As I said in my previous note, it looked like the market was set to open lower. That all changed when the TV networks started showing the scene of Iraqis in Baghdad trying to destroy Saddam’s statue. In what was amazing to me, most of the NYSE floor was mesmerized by the unfolding drama. The traders were all watching TV for most of the first hour of trading – one of the busiest times of day for them. Well, the market started rising in anticipation of the statue falling. This was on very light volume, mind you, because the whole world was watching the crowd in Baghdad. Well, the instant that the statue hit the ground the market turned south. Now we’re solidly in the red. This is a classic example of “buy the rumor, sell the fact.”
We saw the same thing on a larger scale with the market’s reaction to the war. We started rallying once it appeared that Bush had given up on the UN – about 3 days before the war started. From my read of the charts, the market decided that the war was won last weekend. We see this action time and time again, yet the media can’t seem to figure it out. No doubt tonight’s financial headlines will be all about wondering why the market fell on such good news. It’s simple, the people who anticipated, and got in early, are taking their profits.
