“The anatomy of a bull market” in the September issue of Futures magazine offers an excellent analysis of what one might deem a “traditional” bull market. I like it because it frames the subject in wide, historical terms. This appeals to me because I believe it is difficult to predict human behavior in the specific, but in the abstract, history often is repetitive. In any case, if you get a chance to read it, it will help you understand the perspective I have been espousing, which is that the economic and market cycles are turning. The only questions that remain are, “How long will the market bounce around in this current range and when will the economy stabilize and begin to legitimately grow again?” Tomorrow and the next day, and maybe the day after, I will turn my attention to the article, and what it might mean for us as traders or investors. Today, however, the Flash Crash of May is on my topic list.
One argument out there as to why the volume is so light in the market these days is that the “retail” investor has lost confidence in the market since the unbelievable wide gyrations and ultimate collapse of the market in 2008 and the Flash Crash of May, when the market dropped some 700 points in less than 20 minutes. Personally, both of these events tempered my enthusiasm for both trading and investing. The problem is, however, if one does not work the market, how does one make his or her money work in these days of unstable real estate and ultra-low interest? So, I have stayed with the game, even if caution is my mantra. But, what about all of the others who have left the market? What will it take to bring those folks back? Will it be the SEC “report” coming out soon?
NEW YORK (Reuters) – The upcoming flash crash report will show that regulators have a “very deep understanding” of the marketplace, giving the public a measure of confidence, the head of the Securities and Exchange Commission said on Monday. “It will paint a very clear picture of how the markets operated on that day,” SEC Chairman Mary Schapiro said in an interview, adding she expects regulators will issue the report “in the next several days.”
The May 6 crash knocked some 700 points off the Dow Jones industrial average before it sharply rebounded, all in about 20 minutes. No full explanation of the unprecedented breakdown has yet been given, stirring concerns among investors about the stability of the high-speed electronic marketplace.
Again, personally, whatever the SEC report tells us will do little to assuage my concerns about the power and dominance of those who use highly sophisticated, algorithmic software to manipulate the market. Yes, it might be helpful to understand more deeply how this chicanery works, or, rather, how it worked on May 6th, but will the report do a darn thing to control it? That is my question. Will the SEC take more steps to regulate it? Or is this more of the same from the cozy relationship that has existed between the SEC and the power elite in the financial world?
Trade in the day; invest in your life …
