David Moenning wrote a short but thoughtful piece about our current slide in the markets on the site today (See, Commentaries: More Questions Than Answers). Below is an excerpt.
All eyes were on the Far East overnight as Japan’s quarterly Tankan survey came in better than expected while China’s PMI (Purchasing Managers’ Index) confirmed the “slower growth” theme in what many consider the most important economy in the world at the present time. And then this morning in Europe, we learned that the PMI’s of the Euro zone, UK, Germany, and France show that their economies are not falling off of a cliff.
The point he makes is a good one – the market is in a state of contradiction. On the one hand, although the economic indicators have weakened, the recovery is still in place. On the other, the market just might be overvalued based on the bull’s strong run up from March of last year; thus, the bear’s just might have an opening to push the market lower.
Like so much in the trading world, ambiguity rules. No one really knows what the market will do from day to day. In fact, the market reminds me of Kim Bassinger in the movie, Blind Date. In that movie, she drives Bruce Willis crazy with her utterly confounding and wild behavior. In one scene, she drinks some champagne (her body cannot handle it) and she becomes “out of control.”
The market seems somewhat like Ms. Bassinger’s character in the movie because of the contradictory aspect David Meonning alludes to in his article today One minute the market it is understandable and in the next, it takes a sip of champagne (uncertainty) and goes wild in a not so likeable way. Frankly, like Bruce Willis’ character in Blind Date, I sometimes sit back and wonder, “What have I gotten myself into?” I wonder why the market is so dramatically neurotic. Then again, maybe I know at least part of the answer, which Mr. Moenning also alludes to in his article – “And from where we sit, until the news environment improves and/or the “de-risking” in the hedge fund community is completed, we might as well recognize that we’re seeing very bearish action right now.”
The above point is understandable – hedge funds are major players in market movement. The larger issue for me, and it is one I have railed against before, is the use of highly-sophisticated software to manipulate the market. Apparently, Mr.Moenning has some concerns as well, “As such, the guys running the “seek and destroy” programs at the end of the day found that the path of least resistance was to the downside.”
I do not see this practice going away, nor do I see any attempt to remedy this unfair manipulation. Thus, like one of the most elemental aspects of Darwin’s evolutionary theory, we must adapt or perish.
Trade in the day; invest in your life …
