Reality only happens for a split second. The rest of the time is made up of people’s perceptions. Just look at the markets.
There has certainly been significant corrective activity in financial markets since April 1 and more importantly since April 17. With all the myriad negative factors underway, it is no surprise. But why isn’t it worse?
Everyone knows all the problems already. And the perception is that no matter what the problem, liquidity will provide the answer. See? We all know this!
But the reality is that even with trillions in free money, markets are more illiquid than at almost any time in modern history. With daily volume running half of what it was in 2007, the lights are on but nobody is home. God forbid there would be real selling of size. We got a tiny taste of that last week, down 5%.
The magic halfway point of the “Europe is Saved Rally” has held as important intermediate term support. But it will be tested again soon. Maybe not next week because of the Flag Waving Memorial Day Holiday, but shortly after.
This year is just like last year. And the year before. And being an election year won’t help. Remember what happened in 2008?
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Scott,
In terms of your volume argument, how would the alternative amrkets/dark pool clearing that goes affect on the tape?