The Ignorant Investor

This is one of those times I was talking about yesterday. The Japanese market is facing the prospect of a nuclear meltdown, so it plunged today. According to one trader quoted by the AP:

Peter Cardillo, chief market economist at New York-based brokerage house Avalon Partners, said fear had taken hold in the market as traders worried about the nuclear crisis and a possible slowdown in Japan's economy, the world's third-largest.

"It's a situation where you sell, and you ask questions later," he said.

This is one of those moments when you have to decide whether it's a chance to buy at a discount or stay out. You can buy an ETF for a Japan index fund (EWJ) for just under $10 right now, down from a high of $11.50 only a short time ago. But you have to go in trying to figure out whether $10 is the bottom or just a stopping point on the way to a decline of 20 or 30 percent. During the 2009 crash, EWJ briefly fell to under $7. If that's a potential floor in a new panic, even buying today could result in a 30% loss, at least in the short term.

Looking at the daily chart, EWJ opened at $9.3 and rose through the day as people bet that the panic in the Japanese market wasn't justified. By the end of the day it was above the prior day's close of $10.05, even though the Japanese stock market, which closed much earlier in the day, fell more than 10%.

Meanwhile, the S&P 500 closed about one percent down after dropping by 2.5% early in the day. Is that a sign of strength, in that the American market shrugged off early jitters. Or is it a signal that traders are nervous and are getting into their "crash" mode? I don't know. As I was through much of last year, I'm filled with uncertainty and am just relying on the benefits of doing nothing.