Clearly, all the hyper-talk is creating the reality the market fears. Clearly, my rationality, or any rationality, is ineffective in analyzing the market. Witness the sentence below. I expressed that thought on Tuesday.
The market is still in volatile mode, although signs are that fatigue might be setting in. If so, we should expect more jumping up and down, just not as high and just not as low.
Once again, wrong is the word that best describes my analysis. I would say a five-hundred point intraday drop is both dramatic and far down on the low side. I wonder now if more bad is still to come, especially when the NY Times prints a headline such as the one below.
A Second Great Depression, or Worse?
Although the article goes on to say that a depression is not likely, it does suggest something nearly as traumatic might be coming – a long-term slump. In effect, though, the content of the article is irrelevant. The headline is what matters. Fear is now feeding on fear, and this means a swirling spiral of negativity will drive the consumer and business deeper into a shell. The word “uncertainty” no longer fairly describes the sentiment out there. In my book, “fearful” is now the word that describes the market sentiment.
The U.S. 10-year T-bond could be below 2% at the end of this day. Short-term rates could push through zero. Spot gold could reach $1,835. The VIX could end up 35% higher. The DIJA will probably end the day under 11,000, again. And, worst of all, the breathless media just might run out of breath telling the world how bad things are and will be. Wait a minute! How, exactly, does the breathless media run out of breath? That doesn’t even make sense. I think all this drama has sapped my brain.
Well, maybe my brain is a bit addled. After all, day in and day out, I wade through all of this stuff so I can stay on top, so I can understand. I am now asking myself, “What is there to understand?” If it were facts, rational behavior, or anything else that could be objectively analyzed, studying would be appropriate, perhaps even helpful, but the state of the market is no longer rational, so the best I can do here is observe and learn. Much like a psychiatrist observing a phobic patient in a mental hospital, I can watch and take notes. Yes, that is what I can do, which means leaving the prognosis alone for a bit, at least until I get a handle on the symptomatic behavior. Yes, just observing quietly, not trying to understand is the way to go now. Just watch to see what happens next, and then incorporate that into my brain for later understanding. Just wait until the patient becomes lucid enough for rational interaction.
It is interesting watching a self-fulfilling prophecy unfold, maybe even fascinating. It reminds me of a shark feeding frenzy. When the actual food runs out, they turn on each other just to satisfy their urge. Actually, that reminds me of the market. It is like watching it eat itself.
Trade in the day – Invest in your life …
