Theories On The Market
An interesting thing has happened in the last 6-8 weeks.There appears to be very little sellers present. Literally. The market has made a massive push and it really struggles to sell or stay down.It seems almost funny now how difficult it is to short anything for more than maybe 20 minutes or more. Obviously you cannot fight the market - its doing what it wants how it wants.This action sure makes trading hard, the guys that are really getting the most out of it are the buy and hold.
One thing I know is that no matter what these guys do that are chasing and then bidding the market so it does not sell - it will sell eventually. The only way you actualy make money, whether day trading or longer term investing, is to lock in profits.Until then, its not reality. At some point they will tip the tide to the point where a majority are actually fearful of losing gains and then the selling is real.
A key pattern lately has been to break below support and then out of nowhere a massive burst of buying jams the market back to the highs.This sort of thing happens so often now, its completely expected.Most of the time this results in a new low being made, followed shortly by new daily highs as the buyers chase like crazy.
Even in the height of the bull market, we would repeatedly have 10-15+% corrections in the market that would last a month or so. And this was when everything was just perfect (or everyone thought so). So I am not sure what is going on now. Several theories are in play that I think about:
- Shorts are completely or mostly out of the market. The SEC messing with the short rules before caused a panic, and now there are many proposals again in regard to uptick rule and shorting. Rather than get caught, they are staying away from day trading and longer term positioning.
- Manipulation factor on high.There is a group of funds or banks backed by the Fed and Treasury whose goal it is to push the market higher to form the opinion that the economy has turned.The way the market always rescues itself from the brink of disaster, the ramps into the close every friday, and other odd trading action gives this one some credibility. Would be easy for the government to just give these guys money to push the market up.
- Traders all gone, algo's take over. This one can happen as well - computers have taken over more of the futures trading which drives the market. Since there is no real force to fight them and they are all doing the same thing it just keeps going. This one I like too because the actual variance of price during the rally pushes is actually uncharacteristically low most of the time.I have seen the DJIA futures push up almost 100pts in 20 minutes with hardly a retrace at all, even at the high.Of course this type of thing has happened before, but not nearly as often as it does now on a daily basis.
Whether any of these are true, or a combination, I have no idea and we may never. All I know is the trading action is very odd and I expect at least half if not more of this gain to be gone when this is done. Note - I am not predicting a top, I am saying that when this is done, these idiots will undo this much faster than it actually ran up as everyone heads for the exits.The market could hit 9.000 or 10,000 etc. I really dont think 10k is possible, with GM dust, C is dust and a few others they just dont have the fuel for the DJIA to actually push up that high in the short term.
Maybe everyone just needs to learn to trade again – this is the new market to stay!
