Federal and State raids are never a good thing and WCG investors are suffering that fate today. Note that WCG has been one of the worst performing signals at HEDGEfolios since I gave it a DOWN signal on 4-30-07. As of Monday’s open, WCG was a loser by 36.5% - now its a winner by 38%. Neither of those were results of my good efforts.

The biggest issue with raids is that legal implications prevent the government and company officials from disclosing what it’s all about. No amount of comments like “we are cooperating with the authorities” makes anyone feel better. Meanwhile investors sell in the face of uncertainty and paranoia over worst case scenarios. In these situations, true bottoms are not found until the reason for the investigation is known and the perception of guilt is factored in. It will be interesting to watch. Some shorts will cover and provide some weak support. Some true believers will buy on the dip and provide some weak support. Some speculators will buy hoping that this was an overreaction. My preference is to stay the hell out until the smoke clears.