Category: Archive

• The function of education is to teach one to think intensively and to think critically. Intelligence plus character – that is the goal of true education.
• The time is always right to do what is right.

-Rev. Dr. Martin Luther King, Jr.

Last week we started off with a decidedly bearish day where the market was relentless with it’s downward price action.   What a difference 24 hours later.  While a little less dramatic the trend on Tuesday was clearly bullish and most of Monday’s action was reversed.  Then things quieted down a bit the rest of the week.  Somewhat interesting, was the lack of fighting between buyers and sellers on Monday.  Tuesday offered only mild resistance compared to Monday but no clear signs that the buyers were in jeopardy.  It made it easy if you were positioned in the right direction.  The follow through for the rest of the week showed little conviction in either direction.  This can happen during the earnings season.  Investors and traders are more interested in individual stocks or they are trying to get a picture of the condition of the economy as companies are providing information on sales and other trends.  This can also be a sign of market indecision and lack of commitment of investment capital.  This fickleness of the market leads to higher perceived volatility.  In other words, if you stare at the chart every minute of each trading day you will think the volatility is off the charts.  If you only observed prices twice a month you would think nothing much is happening.

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The new year has been off to a pretty quiet start in terms of market movements.  Not surprising due to the slow trickle of market participants coming back from holiday schedules.

In terms of economic news the monthly U.S. job report made things unclear since it was a worse report than expected.  This continues the “bad economic news = good news for asset prices” cycle we have been in since the U.S. Federal Reserve Board has been participating in the markets through quantitative easing.  Lately with all the prior month revisions, weather, government effects the report results have seemed to become less relevant.  The event is more important.  Here the prevailing opinion is that the numbers themselves don’t move markets, it’s the pent up demand or reaction trading that moves it.  In a nutshell, think of the economic release as an opportunity to buy or sell and since everyone thinks the same there will be increased buying or selling.  The point is that the news itself doesn’t move the markets, it’s the market using the news as an opportunity to move.  More on that in a later post.

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