ES 771 is the bottom!
- Thread starter ML_QUANT
- Start date
YES!!! Dozens of people predict the market direction! Those who are accidentally right blow their horns!!! The rest say nothing...
Another possibility... the bull exited with a bang a few months ago, but the bear will tiptoe out with a yawn and whimper.
Explanation: for the most part, as more and more people try getting into the current market to ride the volatility and figure out how the game now works, the highs are getting lower (everyone remembers how cheap the shares were a few days earlier, and thinks they might get that cheap again soon), and the lows are getting a lot lower, but generally not staying at either extreme for more than 15-90 minutes... with increasingly long periods of limbo in between. Eventually, the two extremes are going to get closer and closer together and converge within a fairly narrow range (probably near one of the lows we've already had), and spend months with occasional brief swings one way or another, but always converging back near that point.
At that point, lots of the newbie investors who've injected lots of new capital into the market and kept it more liquid than it's ever been under similar circumstances in history will, basically, get bored. If the swings are small enough, even the pros might start getting bored. Capitulation not by death, but rather by boredom.
Then... after a few months of boring and disappointing stability, something will happen that causes the market to violently plunge for no good reason. The newbies (and distracted former traders) will come rushing back, and cause the Dow to rise nonstop for up to a week as everyone celebrates the new bull's arrival.
Of course, everyone's enthusiasm will go WAY overboard, and there will be another crash that instantly takes the market back to October 14th levels. Except now, the economy will be in good condition, and even MORE bargain hunters will join the October Newbies... and this time, the market will spend another month or two violently thrashing, but ultimately converging on a HIGHER point with each cycle... until the market becomes boring again, and 90% of the casual traders drop out and find new hobbies.
Stir, rinse, and repeat forever... sometimes drifting higher, sometimes drifting lower, but never "permanently" (in the sense of a year or three) high OR low again. As the barriers to active trading fall, the market will go from boom-bust cycles to stable-volatile cycles, and the whole concept of "bulls" and "bears" will become increasingly irrelevant. Or maybe the new "volatile" state will pick up the "bull" label (think: china shop), and the "stable" state will pick up the "bear" label (think: bears hibernating for months at a time).
Imagine, for a moment, the impact it would have on the market if even 10% of Americans were used to actively trading every now and then, with trades costing just a few cents apiece as competition drives them further down, and the mass public starts to view NASDAQ as being kind of like eBay for stocks. Imagine the dampening effect it would have on volatility if trades literally WERE cheap enough for people to program in trades 1-5 shares at a time, at 5c intervals... and there were millions and millions of people putting in literally billions of bids concentrated in a bell-shaped curve over the span of 10-20 cents.
Eventually, as more and more people joined in and had small trades at small intervals, they'd start canceling each other's effect out and cause increased stability. As boredom grew, they'd drop out, until something triggered a panic or rally with relatively few active participants left and usher in yet another "bull" market for a few days, until so many people have jumped into the fray that the prices are dampened back into a boring, hibernating "bear" market for a few more months.
As for Thursday and Friday, well... try this:
The market took its first plunge on Thursday. The casual traders noticed, and pounced on it to buy all the stocks they were wanting to buy, but waiting for a crash to buy them. Somewhere, a bunch of funds picked a bad time to begin simultaneously liquidating shares, and prices fell another notch. The army of traders noticed, and bought their second, smaller round of purchases.
The fall slowed, but continued as more shares were dumped into the market with fewer shares bought (people were buying shares they hadn't planned to buy and bought fewer as a result... and also started to suspect the deals might get even better). 50c-$1 further down, people bought another round of shares... but this time, were starting to get scared because the fall was lasting WAY too long... so they mentally set their NEXT round of purchases to be at least a dollar lower.
This time, the prices fell a buck, and people REALLY started to panic. As I put it to some friends, Microsoft at $18.76 was a great deal. Microsoft at $18.12 was cause for celebration. Microsoft at $17.77, however, was just plain scary.
But, as luck would have it, word got out about the crash, and everyone who missed Thursday's buying party was ready and waiting on Friday morning to pounce. Eventually, the fall stopped, then began to reverse as people who had to buy shares to satisfy options realized they were about as cheap as they were likely to get. At that point, Thursday's bargain hunters saw what was happening, made one last stock grab before it was too late, and the rest is history.
At least, that was MY perception of what happened yesterday and today.
Explanation: for the most part, as more and more people try getting into the current market to ride the volatility and figure out how the game now works, the highs are getting lower (everyone remembers how cheap the shares were a few days earlier, and thinks they might get that cheap again soon), and the lows are getting a lot lower, but generally not staying at either extreme for more than 15-90 minutes... with increasingly long periods of limbo in between. Eventually, the two extremes are going to get closer and closer together and converge within a fairly narrow range (probably near one of the lows we've already had), and spend months with occasional brief swings one way or another, but always converging back near that point.
At that point, lots of the newbie investors who've injected lots of new capital into the market and kept it more liquid than it's ever been under similar circumstances in history will, basically, get bored. If the swings are small enough, even the pros might start getting bored. Capitulation not by death, but rather by boredom.
Then... after a few months of boring and disappointing stability, something will happen that causes the market to violently plunge for no good reason. The newbies (and distracted former traders) will come rushing back, and cause the Dow to rise nonstop for up to a week as everyone celebrates the new bull's arrival.
Of course, everyone's enthusiasm will go WAY overboard, and there will be another crash that instantly takes the market back to October 14th levels. Except now, the economy will be in good condition, and even MORE bargain hunters will join the October Newbies... and this time, the market will spend another month or two violently thrashing, but ultimately converging on a HIGHER point with each cycle... until the market becomes boring again, and 90% of the casual traders drop out and find new hobbies.
Stir, rinse, and repeat forever... sometimes drifting higher, sometimes drifting lower, but never "permanently" (in the sense of a year or three) high OR low again. As the barriers to active trading fall, the market will go from boom-bust cycles to stable-volatile cycles, and the whole concept of "bulls" and "bears" will become increasingly irrelevant. Or maybe the new "volatile" state will pick up the "bull" label (think: china shop), and the "stable" state will pick up the "bear" label (think: bears hibernating for months at a time).
Imagine, for a moment, the impact it would have on the market if even 10% of Americans were used to actively trading every now and then, with trades costing just a few cents apiece as competition drives them further down, and the mass public starts to view NASDAQ as being kind of like eBay for stocks. Imagine the dampening effect it would have on volatility if trades literally WERE cheap enough for people to program in trades 1-5 shares at a time, at 5c intervals... and there were millions and millions of people putting in literally billions of bids concentrated in a bell-shaped curve over the span of 10-20 cents.
Eventually, as more and more people joined in and had small trades at small intervals, they'd start canceling each other's effect out and cause increased stability. As boredom grew, they'd drop out, until something triggered a panic or rally with relatively few active participants left and usher in yet another "bull" market for a few days, until so many people have jumped into the fray that the prices are dampened back into a boring, hibernating "bear" market for a few more months.
As for Thursday and Friday, well... try this:
The market took its first plunge on Thursday. The casual traders noticed, and pounced on it to buy all the stocks they were wanting to buy, but waiting for a crash to buy them. Somewhere, a bunch of funds picked a bad time to begin simultaneously liquidating shares, and prices fell another notch. The army of traders noticed, and bought their second, smaller round of purchases.
The fall slowed, but continued as more shares were dumped into the market with fewer shares bought (people were buying shares they hadn't planned to buy and bought fewer as a result... and also started to suspect the deals might get even better). 50c-$1 further down, people bought another round of shares... but this time, were starting to get scared because the fall was lasting WAY too long... so they mentally set their NEXT round of purchases to be at least a dollar lower.
This time, the prices fell a buck, and people REALLY started to panic. As I put it to some friends, Microsoft at $18.76 was a great deal. Microsoft at $18.12 was cause for celebration. Microsoft at $17.77, however, was just plain scary.
But, as luck would have it, word got out about the crash, and everyone who missed Thursday's buying party was ready and waiting on Friday morning to pounce. Eventually, the fall stopped, then began to reverse as people who had to buy shares to satisfy options realized they were about as cheap as they were likely to get. At that point, Thursday's bargain hunters saw what was happening, made one last stock grab before it was too late, and the rest is history.
At least, that was MY perception of what happened yesterday and today.
Except things are cheap, think of big funds who need to get their cash invested. Waiting for a bottom they'll end up driving the market higher than present but buying the dips now can hide their purchases and by the time the it's sniffed out is when the market will bottom in a hurry.
There are viable corps whose hard assets and potentials have not shrunk but their prices have. Like the Oil related ones. It is absurd to imagine that the Oil will ever drop below 35 again and what is more absurd is to believe that prices after such huge declines won't meet their previous tops again sooner or rather later.
For the oil to reach it's previous high, give it what 5 years(which in reality will be much less), that's 20% a year solid. Not bad at all!
There is still too much bad news ahead of us for this to be the bottom and the selloff we had Thursday was nowhere near capitulation. I hate to say it but I think things need to get ridiculously cheap before real buyers start stepping in. I wouldn't be surprised to see the S&P in the 500's over the next couple of months.
It is going to take years to sort out the toxic debt and housing problems. We will bottom and begin rebounding before it is fully behind us, but there is alot more pain in store before that happens.
It is going to take years to sort out the toxic debt and housing problems. We will bottom and begin rebounding before it is fully behind us, but there is alot more pain in store before that happens.