Thursday, December 27, 2018

Machinations of opportune traders...

Our live S&P 500 chart, which is on the screen to my immediate left, just caught my eye. While I can't tell you what it is, I can assure you that a bit of news tripped some switches a few minutes ago (red arrow below):



Which has traders now testing the technically important 2420 level.

So why am I showing you this? Why in the world should we concern ourselves with such intraday insanity? Great question!

In fact, the answer to the latter is that we absolutely shouldn't! But you (I'm assuming some of you readers) are. How can you not be? The market's pain of late is THE top news story, and these days you can track your account values on line like a day trader. 

The answer to the former (why I'm showing you this) is to help you understand that the minute by minute gyrations are simply the machinations of opportune traders (some via machines) playing against the emotions of reactionary humans.

I recently fielded a couple of comments from clients bemoaning what their hearing/reading about algorithmic trading creating such monster moves that the little guy doesn't stand a chance.

Poppycock! I say... Absolutely no one was complaining yesterday when the positive trade news triggered a switch in the algos that sent the Dow up a thousand points!

You see, ultimately, the market is going to trend in the direction of general conditions. With traders helping it along, as their biases will ultimately reflect the macro trend. The "problem" of late has been the uncertainty surrounding general conditions, mostly fostered by the threat of a protracted trade war. A threat that is now doing a number on overall sentiment (justified by many businesses, at a minimum, delaying or cancelling expansion plans, if not already rejiggering their supply chains). 

On that last note: Success (read tariff war ends) after the next two months of U.S./China negotiations will, at a minimum, markedly help sentiment -- and all indications are that it would do wonders for the market as well. I.e., you may once again experience that happy rush (that right now seems like a distant memory) while checking your accounts online.

We'll keep you posted...

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