Bob Dylan, the archetype of the 1960’s folk singer and the architect of the folk singer turned rocker ignited his blast to fame with the words, “The times they are a changing”. He was right then, some 50 years ago, and his words ring true today, even more so, but with less drama.
- So, the times, they are a changin’. The question you have to ask yourself is, what are you doing about it?
The above comes from an article about trading. More specifically, the writer pushes forward some contemporary notions that all traders should at least be familiar with, if not apply on a regular basis. The question asked is in reference to how traders are adapting to the changing world of the market, a “changing” that goes hand in hand with the transforming world, a technologically driven transformation that affects the market as well.
For example, the power of technical analysis to drive markets has increased dramatically from the days when traders actually performed the task of trading. Today, computers and their algorithms perform technical trades faster than any trader ever could and they can and do perform those trades repeatedly (thousands upon thousands per second).
Thus, the effects of technical analysis are compounded on both the buy and sell side, which creates, in my mind, a predictable volatility, a certain identifiable chaos, an example of which we saw recently with the whole “panic” around the emerging markets and such. When the panic starts (the algos start selling faster than you can think), get out of the way and let it flow past. If the fundamentals of both the market and the economics of the world are decent, the whirlwind will pass, as it just did.
The last few days have seen the panic receding as the algos go looking for a buy instead of an across-the-board sell. The market is calmer with the bulls back in charge, yet, there is a sense from some that the current rally will not last, that technical barriers will cause the market to pull back, to hit a ceiling and either blow apart or stagnate.
- As for where the rally will run out of gas, I think the most any of us can hope for right now is a revisit of the 1850 level, where the S&P 500 peaked in late December and mid-January. The upper Bollinger band is going to be around that level by the time the market could get that high, and you can bet a lot of traders will have their finger on the “sell” button there. Today’s surge, however, looks like it at least bought the market enough time and room to get there.
Maybe so, and it is something to keep an eye on, but, for now, the market seems content to slowly regain what it lost in the algorithmically-driven sell off. As I write, the market is up a bit again today, and, more importantly, the VIX is now hanging around the mid-thirteen range, a comfortable zone for sure. This is the time to build up positions that were knocked down in the recent “run for the hills” drama. Between now and 1850, there is money to be made.
Stepping back to the world transforming, I have been looking a bit more closely at bitcoins, the latest and greatest crypto-currency.
- If crypto-currency is to succeed, its proponents need to acknowledge that it’s hard to divorce money from politics.
It seems to me that if the proponents of the bitcoin are not acknowledging that money and politics are in a long-standing, long-term relationship, they are simply ignoring reality. One thing that seems to never change, no matter how much the world changes, is the reality that money and politics are inseparable.
- If you had to summarize France’s official position on technological change, it would go like this: Progress is great and we love it — just so long as it isn’t too disruptive.
Too disruptive? Just ask the run-of-the-mill trader (grinder) of today if technology is too disruptive. It is, if you don’t understand what is happening.
- Comcast Corp said on Thursday it would buy Time Warner Cable Inc. for $45.2 billion in an all-stock deal that combines the two largest U.S. cable operators. The friendly takeover comes as a surprise after months of public pursuit of Time Warner Cable by smaller rival Charter Communications Inc., and immediately raised questions as to whether it would pass the scrutiny of anti-trust regulators.
Will it or won’t it pass muster with the US regulators, and if it does go through, how will it affect the entertainment market for the home viewer? As someone who does not subscribe to cable TV, I don’t really care about the merger. As someone interested in preserving competition to foster a healthy market, I do care. As a trader, I both care and don’t care. I don’t care because I don’t trade these big-cap stocks. I care because, as I wrote a moment ago, this type of merger threatens competition and if competition goes away, the value of the market as a tool to make money diminishes.
My hope is that money and politics, although inseparable, will have a disagreement on this issue, and even though it will not mean a breakup, it will mean the two sides will fight it out. Anyone in a long-term relationship, a marriage, for example, knows exactly what I am saying here, right?
Happy Valentine’s Day.
Trade in the day; Invest in your life …
