This week will be different. This week will be different. This week will be different. You couldn’t see it, but I was mentally clicking the heels of my red shoes together while I was saying the above to myself. Dang! How did Dorothy make that work
This week is beginning just like all the others recently. Greece, Italy, EU/Eurozone fracturing, global recession, economic slowdown, the end of the world. Again, how did Dorothy do that little trick Never mind. This reality will be here for a while, and neither the man behind the curtain nor the good witch can do a thing about it. Hmmm … Speaking of witchcraft …
Call it voodoo if you like. The fact of incremental moves in the market is this: If enough traders believe something to be true, and act on it, the prophecy becomes self-fulfilling.
The above is provocative and, in my experience, true. Just like humans, the market can and does create its own reality. As I have said so many times, the “Market R Us.” The market simply reflects the current mindset of all its participants, thus, what we believe is. Now this leads me to examine an idea –
The money question for 2011 is whether this year’s horrific news flow will trump the trends, obviating any historical seasonal influences. If seasonal patterns stay in place, November marks the beginning of stocks’ strongest three-month period.
If the market r us, and we create our own reality, then how likely is it the pattern above will repeat The answer lies in the question – the pattern probably will repeat, if the horrific news flow abates. I say “probably” because that is the right word here, as the odds are …
With last month having been the 4th best October on record, history suggests even stronger gains than the norm. Of the 20 strongest Octobers since 1950, the period from November 1st to January 31st has been positive 17 times, with average gains over 6%.
One has to be brave to buck those odds, unless one is confident in one’s understanding of the market psyche. To bet against such an historical probability means one believes the market will cast off historical patterns and remain in the present, which ain’t so pretty right now, if you buy the news, that is. Italian bond buyers, however, aren’t interested in historical patterns, as the Italian 5-year-bond sales today reflect, rising above 6%. Apparently, the governmental change did little to assuage fears. Italian bondholders are buying the news instead, and this, of course, sets the stage for a downside bias in the market overall. Well, I do like historical patterns, but I don’t believe in Voodoo. I believe economic fundamentals will ultimately carry the day, so I keep my eye on those, and those have stabilized, and, in some very key areas, improved…
On a yearly basis, GDP jumped 6.0 percent – edging forecasts for an increase of 5.9 percent after declining 2.1 percent in the second quarter.
Trade in the day – Invest in your life …
