Meme Watch - Pain

Okay. Those of you who have been reading me for a bit know that I called for a second decline, similar to what we are now experiencing. The selling, the dirge of selling, is scary, and the fearful rule on the street this evening. The averages are down big at this point, we were oversold days ago and now we are worse.

One might think this is it. This is the big flush.... It is all downhill from here.

Thats why tonight's Meme Watch is Pain. The state of pain that the news, your broker, your portfolio, and pretty much anyone who is following the market wants you to reflect. Down here is where pain is produced. We need pain to ensure that stock changes hands and builds a base to move higher. We had no pain at all up until a day ago. Now we have real pain and those who are weak will capitulate. This is why this is NOT the big flush, but the forced rush downward in order to coil the spring.

The reason I want to highlight this very prevalent meme should be obvious. You buy when there is blood in the streets and you sell when euphoria is highest. I believe that the markets are beginning to pay their final penance for the stellar year they printed last year. Yes, I believe that when the pain is this intense, you force yourself to buy.

Here are my catalysts, one by one:

China - Everyone thinks that the government there is going to slam the brakes on the growth, forcing Asia into a recession. Just like all the other one day wonders that the news produces, this theme is being over reacted to. We now have PD and AA selling down huge (talk about pain), and all for what? A promise from a previously inept government to reign in the overwhelming forces of capitalism? No way. I'm sticking with my raw materials focus which at this point is a large part of my PF.

The 10 Year - 4.52 makes me smile. Id like to see it move higher but I really want the sell off in bonds to take a breather for a minute. In the grand scheme of things, we are going to 5 on the 10 year by year end, but I would like to see the bond market sell off more orderly. I'm still on the sidelines here. This erratic move higher is also spooking the markets something fierce.

Earnings - I really don't know what to make of this. By all accounts, earnings were out of the park outrageously great. Yet we have this continued selloff. This brutal, unrelenting selloff. My confusion is not why this is happening ("sell the news"), but how to price these great quarters and guidance into a market that cant keep a bottom. I believe that this is going to ultimately be a catalyst higher if we can mount an upward move any time soon. Let me tell ya though, the economy is back big.