Guest Post by Jesse
Asks my old friend, Dominique, from the Côte d’Azur.
No, not yet.
Close, but no cigar.
This is still just a correction. It is steeper in the big cap tech, but that is natural given its high beta and outsized role in this latest bubble.
But looking at the three, they do not yet bear the mark of an attempt at a rally back from the first drop that ultimately fails, and breaks key support to the downside. This would set up a more substantial plunge of around twenty+ percent.
Here are the three major indices that I watch.
The NDX looks promising, but the SP 500 must confirm this. And its chart is remarkably clear.
There is a decided lack of panic, and more cynical trading than one might see at the threshold of a major conflagration.
But let us be watchful, especially for some ‘trigger event’ that would induce serious panic selling on volume.
Sit back and relax because there is almost certainly many people out there who stand to lose much more than you do if stocks tank.
Yes there are. You are exactly correct. But it would be a bad idea to assume that the computers who trade the vast majority of shares in the market today have your best interest at heart. Those computers execute code that is controlled by people who have goals that you can not know. In fact, if you did know their goals, you most likely would not understand why they held them.
If you assume that their only goal is the same as yours, to make money, you are most likely the one who will get fleeced. The movements of the market are not controlled by the sentiments of the investors. The vast majority of investors have absolutely no impact on the movements of the markets.
There are only two goals for investors: buy low, sell high.
Same for traders (who are not investors).
Both groups are moved by only one sentiment, to make money. The sentiment twins, fear and greed, drive traders in herds and investors, reluctantly.
Algorithms, which became famously unreliable after the collapse of Long-Term Capital Management, don’t produce profit from skimming movements outside of standard deviations, they make money by front-running traders.
Algorithms are more likely to have a role in the halt of trading than the collapse of a market.
When bids collapse and markets gap down because traders are all exiting, investors will step in and mop up the blood.