Once again, we find ourselves at Monday, the first day of the trading week. How does that happen so quickly? No matter, here we are and the market is jumping out of the gate, dashing into the green with energy. The reason?
- U.S. stock futures were leaning higher Monday amid broad international market gains as China and European Central Bank stimulus hopes persisted.
Hope for stimulus? This is what moves the market, hope? True, the market is speculative, but does it really move on hope? Could it be that the market is sensing that Europe will sit tight on raising rates because inflation is not an issue? Could the market like the fact that Janet Yellen indicated, “the U.S. economy needs extraordinary support for some time?” Could it be that buyers are getting in ahead of the March jobs report, the Chicago PMI, and the other March economic data coming out this week because they believe those reports will indicate a pickup in the US economy?
Market players are gamblers, and good gamblers play the odds, they bet on what they believe will happen next. True, more than a few gamblers hope the die will cast a seven or eleven or the silver ball will land on red not black, but those who win more than they lose study the game they are playing, they know the odds of a card coming up or not, and they are pretty sure they have a winning hand before they bet big. It is all about making the best bet based on what information you have gathered and if there is hope, it is that we hope we have figured it out.
Here is an example of a calculation, a reasoned look at the market, and a conclusion reached over the weekend.
- All the indexes ripped higher out of the gate on Friday. The oversold condition, in the Nasdaq and the Russell 2000 mentioned Thursday paved the way for the move higher.
- The S&P 500 daily trading range is the setup for the algorithm machines and the hedge fund community.
- The S&P came within 10 points of its sell range on Friday and within 10 points of its buy range. Volatility on a daily basis is the theme.
- The DJIA was up triple digits at one point and the other indexes were also up huge. A late-day selloff paired those gains. The Nasdaq and Russell 2000 went red again before closing slightly higher.
- On Thursday, the market was searching for a bottom. Friday saw that bottom made.
Is the above narrative true? We will see, but if you believed the market found a bottom on Friday and you played the opening today, well, it is likely you would have made some money. Or, if you bought on Friday and are holding on to see where the market goes today, it is also likely you will make money over the longer term. Then again, maybe you are betting the economic data coming out this week will indicate the economy is gearing up again, so you are a buyer today. No matter, the point is: think it through and don’t believe for one minute that hope is a fruitful strategy.
- The most important thing to do in the near-term is to be ready for the next big move. Again, getting the big moves right is the real key to long-term success.
The above sums the goal up nicely. The only thing I would add to the thinking is that being ready for the next big move means having bought on the dip or being ready with cash to buy on the way up.
I don’t place much value in Facebook, but one does have to give credit to Mark Zuckerberg for his role in creating the social phenomenon. So, when he talks about the next big step in computing and the reasons why it will be virtual reality (VR), it is reasonable to at least listen. True, VR has been around for some time, but it has never gone into mainstream computing because of the cost and its “not quite there technologically” reality. It appears that is about to change.
Asked on the investor call why the time is right for mass-market virtual reality, Zuckerberg cited the low cost of the necessary components. “One of the things driving this is that people can reuse components mass-produced for phones that can render a world quickly enough to not make a person feel motion sickness,” he said. “You need to render everything in a virtual world within 15 milliseconds, otherwise it’s too jarring and doesn’t feel real. For the first time, we are able to do that.”
Trade in the day; Invest in your life …
