Rise Of The Machines
I continue to be amazed at how the market has been transformed into a playground for computerized trading programs and algorithmic trading controlled by high-frequency traders. I believe yesterday marked the ninth day in a row in which the Dow moved by 100 points or more, which is unbelievable. The algos have everything to do with this, and I’m not sure it is a good thing.
This extreme volatility is scaring away the retail investor, who is already burned to a crisp after the 2008 financial crisis. How would somebody wanting steady growth of capital want to come into a market like this? I am hesitant myself, and I am young and willing to take risks. Imagine a risk averse investor in their 50’s looking to give their retirement prospects a boost over the next ten years or so. It takes an iron stomach to invest in this market.
Apple Reaction Appropriate
Apple (AAPL) icon Steve Jobs passed away this week, which didn’t dent the stock too much because it was largely priced in. I think the company will be fine because his imprint is so ensconced in everything they do that his ideas will live on for many years. They must have been planning for this day for months if not years, so Apple shareholders should not be selling on this news.
Bottom Reached?
The S&P 500 hit 1098 and then bounced hard by about 6% over the next several days. Many think this will be the low, but I am not so sure. Nothing has really improved out of Europe, and we have had many sucker rallies over the past year. I would be skeptical that we are off to the races on the upside now, although this earnings season will be one of the most crucial in a while (of course we say that every earnings period). Look for company guidance to set the tone for the market, and also give a strong clue as to whether or not earnings estimates have to come down or not. That is the key to the market’s next big move.
Random Market Thoughts – 10/7/11 is an article from: 
