This morning, as I watched the market open, a sea of green with just a speck of red filled my screen. In the middle of the upward-moving indices, the speck of red looked isolated and lonely. The VIX stood out as the only index to go down as the rest went up.
Yesterday produced another batch of ho-hum US economic news, and the traders that knocked the market on its heels the day before seem to take a long lunch. A flurry of buying while the sellers were out to lunch brought the market back to almost flat, and then some, but not all of those sellers returned and half the gains were lost. The market finished down, but not that much. The so-called “Fed Effect” seemed to disappear quietly overnight.
After the market closed yesterday, it seemed apparent that it would open on the upside today, if it had any reason to do so. Although yesterday’s economic news from Europe painted a dismal picture, and the EU commission reported today that the EU would not recover economically in 2013, the market must have seen the news from Germany as good enough to spark up.
- The German Ifo business climate indicator for February rose to 107.4, its best one-month rise in more than two years, boosting optimism after Thursday’s disappointing PMI data stoked concerns over the euro zone economy.
True, better-than-expected earnings from Hewlett-Packard probably bumped the market a bit, but all in all, most of what is going on in the market the last few days only makes sense if one understands that the market is often irrational, especially when traders get their way with it …
- Making sense of the stock market action can be challenging at times. For example, one minute the focus is on the economy and the next it’s on the Fed.
Now, add to the traders’ arsenal the whole gambit of computerized trading tools and fast-moving irrationality can take over the market quickly …
- The vast majority of the down move had been algo-driven and while advancements in computing have been impressive over the last few years, computers still don’t have the ability to reason. And with algos racing other algos to get on the right side of the move and all the computers following the same trends on a millisecond basis, the reason behind this type of move really doesn’t have to make a lot of sense.
David Moenning’s words above (State of the Markets) makes sense to me, so my advice to those who care is to wait this irrationality out. As I said yesterday, take a break, take a nap, or take the kids to an amusement park. Or, as my girl friend told me yesterday, take a walk with your significant other and her dog, which I did, and it helped.
Truthfully, sometimes all this analysis tires me. I get to the point where the non-sense begins to make sense, and then I think my mind is not clear. Just thinking I have no clarity on the market means I have no clarity on the market. In fact, that last sentence speaks to a certain befuddlement couched in an implied understanding. Really, did I just write that?
Wow! I need to suggest to my girlfriend that we get her dog and go for another walk. It is cold and snowing outside here in Utah, but maybe, just maybe, stepping outside into that wintry weather will help me find some clarity. Perhaps, when we return, the market will still be in the green or flat, as I think it should be, given what I think I know about an entity that is not behaving the way I think it would under circumstances that are, at best, uncertain. OMG, I did it again … “Honey, grab the dog! We’re going for a walk!”
Trade in the day; Invest in your life …
