Change in market character.

As a trader there is something awesome about seeing a market change.  There will be a transfer in someway of capital as traders catch up or fight it.

The theme

First it is important to note that I look at the markets in terms of the S&P 500.  What we have seen is buying the NASDAQ (cheapest market to effect S&P 500 at lower prices)  to lift the S&P 500. Then we had some strength in the Transports and Dow when NASDAQ got tired and the occasional time when the Financials chipped in. Now we are seeing the S&P500 hold while everything else drifts, relatively.

What this means

I am not sure at this exact moment. This change has occurred mostly over the past 5 or 6 trading days with today being the most obvious.  When a market makes something obvious, I am not sure it has reached the critical mass of obviousness, people act. Markets force traders to act by price and/or relationship changes. It failed to get out of a range and is taking the relationship route.

The options

When relationships break, action is forced by bringing things back to balance.  S&P 500 moves lower or all other markets move higher. Or markets pauses till other markets catch up.

Question I must ask

Is this change a shift in participants thesis or to attract them?  That is what makes it very difficult. I believe the market is trying to attract participants and has been for at least 3 years.  At the same time, nothing lasts forever.  If it is to attract participants it means nothing and anything can happen.  If it is everyone piling into the S&P 500, the most expensive market to move, than they are risking more.  This means if we see a continuous break or rally we will see an extended move probably to the top of the range to low 1400’s or bottom to the high 1100’s.  And from there we have a new market.

Conclusion

I am a short term trader so there is a tendency to see things too quickly.  I am not in the prediction business and my opinion can change rather quickly.  What I am certain is the market is trying to say something and it is saying it loudly.  It feels like we are at an inflection point.  But I do not know of a business that accepts feelings for goods or services.  Always, always protect yourself.

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  • PG

    Change in market character could mean the researches trader made about its stationarity are no more reliable.

One Response to Change in market character.

  1. PG says:

    Change in market character could mean the researches trader made about its stationarity are no more reliable.

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