This drawn-out trading range situation is certainly raising the tension in the market. Though volume is slight, it feels like a powder keg in the making. Since the Flash Crash, most market participants have been expecting a repeat of the crash. But even with all the bad news, markets simply will not conduct themselves in any sensible way in relation to the reality of the economy. Equity markets operate on “market reality” as opposed to “normal reality”. Some call it Bizarro World and it certainly feels that way on some days.
The topic that I’m most often asked about is whether or not the market is “rigged” or manipulated. The not so simple answer is “partially.” There is always someone who has information that you don’t have and large pools of capital that can skew the markets. There is also clear government manipulation in many markets, from Forex to Treasury Bonds to commodities and S&P 500 Futures. But aside from the obvious market actions controlling the quantity and velocity of our currency, any manipulation is speculation. As the above factors can attest, much of the market rests on sentiment and the nature of cause and effect. What matters, is that we can successfully operate in the market as it is, regardless of the common perception that it is rigged against you.
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Diggin’ your radio show, SB. It’s like a coach’s pregame talk to get one in the proper mindset for the big game.
Agreed. It’s a nice way to start the day. It’s taken me away from the last hour of Bloomberg Surveillance.
agreed. thanks scott. tuned in about a month ago and now i make it point to get up earlier to listen and take notes.
The fact that High Frequency Trading algorithms rule the market, and it has been estimated that 5 of 6 trades are performed by a computer, based on these algorithms, all historical market data is meaningless. Unfortunately, those that comment on the market cannot recognize this reality as the paradigm shift that it is, because then you would have nothing to sell or do, unless…you comment solely on the technical analysis that aligns with the algorithms. Any mention of “seasonal” data, “selling the news”, “buying the dip”, etc. is now filed under “before algorithms/old wives tales”. Like Fly, I’ve got their algorithms topping out, but I remember back to March of this year, when I had the same buildup, and the market moved through three resistance zones before finally crashing back to median. Looking at amgdata.com, equity just caught a bunch of fresh capital to feed the machine. Who knows what can happen next week. I’m short, but mostly cash.
AAII at 68 %. (stupidly bullish)
“As you can see from the chart, in recent years, we’ve seen this level reached only a handful of times: December 2009, May 2008, and October 2007. A quick glance at the chart of the S&P 500 will tell you that all of those instances were much better selling opportunities than buying ones:”
http://www.tradersnarrative.com/sentiment-overview-week-of-september-17th-2010-4696.html
Looks like the “September Surprise” is working…