“Epiphany.” I love the word. It has a nice ring to it, a pleasant sound when heard or played in my head. Interestingly, it is Greek in origin, and with what is going on with Greece right now, well, that is not so pleasant.
Anyway, the longer I live, the more I come to understand that life is rich with epiphany. In fact (you guessed it), I had one this morning. Oh, nothing of a magnitude, mind you, but an epiphany none the less. Like a soft LED bulb just turned on, I saw the market as a desert filled with shifting sands, a movement of mass from one position to another. It made sense because the market is continually seeking balance between buyers and sellers. Money continually flows from one market to another, like weighty sands piled too high in a desert or spread so thin the slightest breeze will carry them to new piles.
- The dollar dropped across the board on Thursday after weaker-than-expected U.S. economic data, although its outlook remained upbeat as many investors continued to price in an interest rate hike by the Federal Reserve some time this year.
So, the money shifts from the US dollar to markets such as forex and oil, as those two markets are pegged to the US dollar, so when the dollar moves, so do those markets, in the opposite direction.
- The euro rose to one-week highs versus the dollar and was last up 0.4 percent at $1.1380
The US dollar weakens and the euro gains and so does oil. This continually happens with all markets – the sands shift.
- U.S. stocks advanced early on Thursday, with the Nasdaq at a 15-year high, following a ceasefire agreement between Russia and Ukraine and surprising stimulus measures by Sweden’s central bank, although soft economic data tempered gains.
The geopolitical good news from Europe is seemingly (but is it so?) enough to move the sands, as the possibility of a breakthrough with Russia via Ukraine offsets the “soft economic data.”
- U.S. consumer spending barely rose in January as households cut back on purchases of a range of goods, suggesting the economy started the first quarter on a softer note.
Perhaps more than the geopolitical news on any given day, the constant flow of economic data is the primary catalyst for the shifting market sands. Day in and day out, the news creates perceptions, but none have more ability to shift the sands than economic data. Okay, then, so why is the market hanging onto the green today? In a word – oil.
- Traders pointed to a weaker dollar as boosting buying on Thursday as the U.S. unit fell as much as 0.7 percent against a basket of currencies, making dollar-priced commodities such as oil cheaper.
The market seems to like it when oil prices rise, at least from their current low-level state. This, of course, adds to the wind blowing the sands around. In a word – volatility.
- Volatility in the oil market has jumped to its highest level since the financial crisis as traders battle it out, with prices swinging in wide daily ranges so far in February.
But it is not just oil that is volatile. The overall market is volatile and unstable, as the money flows between buyers and sellers, as the sands shift from one market to another.
Actually, now that I think about it, my experience this morning had less to do with sudden enlightenment and more to do with seeing the market metaphorically, a new and different simile if you will. The market is like a desert, filled with shifting sand piles of varying heights, piles built up and torn down from the slightest breeze or the strongest zephyr.
Okay, but I still like how the word “epiphany” sounds in my head.
Trade in the day; invest in your life …
