I don’t know where to start today. I really like the expression “a lot of weather” – you know, how a day might be sunny, windy, then storms, then hail, then back to sunny, then back to storms … and in the midst, or after it all, some people say that there is/was a lot of weather today. It never fails to make me smile, as I’m sure is the intention of the speakers.
Well there was, and is, a lot of market today. So much happening (but even when there is nothing happening, there is always a lot happening … 🙂 ).
Where to start?
Prior to the open yesterday I posted that I had prepared a post but abandoned it when it just turned into too much of a rant. I posted a summary, which was, the market was really short and therefore the highest likelihood outcome was a rally, and even if it dipped the dip wouldn’t last long or be deep. I have a compelling urge to explain further, and I’m going to try to avoid the temptation of entering ‘rant on’ mode again.
OK, so what was it that convinced me the market was short and was going up? Numerous inputs.
I read quite a few blogs. Some of them are pretty much purely data-driven, and therefore reasonably dry, and are what I turn to for a bedrock view, a base. Some of them, though, are a bit more wide-ranging, and the authors, and guest authors, post more opinion-related pieces, usually market-related. I avoid the ‘hysterical’-type of blogs, that are always pushing a particular point of view (the ‘doom and gloom’-, ‘Armageddon’-type blogs. This may be a weakness, I should seek out conflicting viewpoints, you might say. Maybe, but there are plenty of conflicting viewpoints to be had from people blogging with reasonableness and rationality not to have to bother with the nutjobs. And I don’t have the time or energy to wade through nutjob blogs. Sorry, I’m ranting … back on topic).
OK, so I read quite a few blogs, written by reasonable, rational types. The past few days many of these blogs have turned very, very pessimistic; not just the writers, but guest writers. I think this pessimism was reflective of the market view held by many. Reading through the blogs on Monday morning (here in Australia), I was struck by the nearly overwhelming bearish view. And maybe this was a reasonable view, the news has been almost exclusively bad, the price activity, less than bullish (on the face of it). And the last two weekends have brought bad news, with good-size sell offs on Mondays. But, if this pessimism was:
1. Indicative of wider market pessimism (I believe it is/was)
& 2. Such pessimism was reflected in market activity (i.e. more shorts than normal, buyers holding off making purchases) (again, I believe it is/was), then the likelihood is there is pent up buying to be done (shorts waiting to cover, purchasers waiting to buy), and thus any downmove in the market will be bought, and upmove, chased.
Another thing on the blogs I noted. There were two stories about the evils of ‘fiat’ currency. These sorts of stories are a staple of nutjob blogs, but are quite unusual on the sort of reasonable, rational blogs I read. Look, discussing the pros and cons of fiat currency (the nutjobs tend to only list of the cons, though) might well have a time and place, but its not something I am interested in for my trading inputs. When I saw these two articles I said to myself “I don’t have the time, or the inclination, to read these, but they are indicative of a fearful writer and maybe then a fearful market”. (Actually, I didn’t say this to myself, what I really said was: “WTF? This s**t again!” and clicked away fast).
I also read a report on some guy who had found an obscure technical indicator, “The Long Term Haurlan Index”, which “is showing a big divergence now, similar to ones that we have seen at past instances of impending stock market turmoil…” … and “which can be a setup for a meaningful intermediate to long-term correction.” I’m all for being open to ideas, and letting people do their own thing in the markets and believe their own beliefs, but this article just looked too similar to those espousing the “Hindenburg Omen” (that famous non-event from last US summer) for my liking. The publication of this article was just another sign of pessimism and fear. IMO. (As to the usefulness of the indicator, here is the article for readers to make their own decisions: Long Term Haurlan Index ).
Also, the indicators I look at (not ‘technical indicators’ like MACD, stochastics, RSI etc, I don’t use those. At all.), like the TED spread, copper and so on (I have covered many of these on the blog before, but not all) were stabilizing/recovering their equanimity after looking stressed last week.
I don’t manage to get a strong view every day, but yesterday was one of those days when things came together to a head.