A Bull Within A Bear

The market madness during the past week has been truly stunning.

The tumultuous volatility in equities has been unprecedented, and even the most ardent adjectival devices fail to capture the essence of what likely will be looked upon as the greatest turning point in financial market history.

Last week, we actually had a bull market within this bear market. From the lows on the Dow last Friday, when it was down more than 700 points, to the highs of the Dow on Tuesday morning, we had a 23% rally!

To be certain, the sharpest rallies historically happen within bear markets, but I can’t recall a bull market that lasted just under two trading days!

Of course, today’s massive plunge of more than 500 points (as of this writing) underscores the truly wild and unprecedented levels of fear and loathing oozing through every crack and crevice on Wall Street.

Just look at the move in the S&P 500 since late September.

It’s hard to find a precedent for this kind of plunge, save the declines of October 1987 and, of course, October 1929.

Now, because of the high selling volume in U.S. markets, some people have asked me if global markets are the place to be. To those people I say no — at least not yet.

One glance at the chart of the EAFE Index shows that international equities also have been caught up in this hurricane-force sell-off.

But despite the selling in the EFA, I do think that smaller emerging markets may be the first to come charging out of the gate when the bulls return en masse. Most of the emerging markets of Asia have strong economic fundamentals, and most have growth drivers in place that can take their financial markets higher.

I will be looking to those areas in the coming months for a cue as to when to start thinking about making some international investments. But until I get a cue, any cue, that this market meltdown has cooled, my advice is to stay on the sidelines and exercise your patience.