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Reasoning for the sell off
- Thread starter Comptalk
- Start date
Quote from HolyGrail:
When everyone is "in it" refers to retail traders. In terms of someone always owns it this is simply not true at all times. Stocks do go into market makers inventories when there are no buyers.
You're saying the Market Maker doesn't own the stocks he has in inventory?
http://stockcharts.com/h-sc/ui?s=$WLSH&p=D&b=5&g=0&id=p58693394404
I dont have time to go through all the charts individually. This one is the Wilshire 5000 which represents the entire domestic market more or less.
In mid-December, you can see where it made its high and was crawling above the 10 day moving average which was a very healthy sign.
Now you can see where the 10 day is crossing the 20 day and where the total market is now bouncing off the 50 day, twice. The 50 day is also starting to lose its upward curve.
This tells me that there is a problem. The market is waiting for more information to confirm the uptrend.
Now we have been told that the Fed's main concern is inflation and that there might not be a rate cut this year when the market was expecting one. Thats a fact.
Steve Jobs today was not fact, it was a person who talked the stock up with a phone that has not proven itself yet. Today should be regarded as a headfake. The market will sort it out tommorrow and figure out that the information only pertained to Apple. I saw some other stocks totally unrelated to Apple rallying too and thats because they were tracking the NDX and saw the bump. Headfake.
There is a lot ahead. A beige book. A fed meeting. The earnings calls and warnings in which Motorola and Sprint both announced bad news. If Motorola announces bad news, then what will Nokia announce, what will the chip makers for those phones announce. Lots of other reports. More fed speakers. Democrats and new policies in Congress. You know that it all isnt going to be good. Christmas is over, tax season and vacation months will be ahead. No one is going to be cheery.
The strategy needs to change because although the trend has not officially reversed, we are in a position where it might and very quickly. Look what one page from a fed report did a few days ago. The market is that sensitive right now.
I dont have time to go through all the charts individually. This one is the Wilshire 5000 which represents the entire domestic market more or less.
In mid-December, you can see where it made its high and was crawling above the 10 day moving average which was a very healthy sign.
Now you can see where the 10 day is crossing the 20 day and where the total market is now bouncing off the 50 day, twice. The 50 day is also starting to lose its upward curve.
This tells me that there is a problem. The market is waiting for more information to confirm the uptrend.
Now we have been told that the Fed's main concern is inflation and that there might not be a rate cut this year when the market was expecting one. Thats a fact.
Steve Jobs today was not fact, it was a person who talked the stock up with a phone that has not proven itself yet. Today should be regarded as a headfake. The market will sort it out tommorrow and figure out that the information only pertained to Apple. I saw some other stocks totally unrelated to Apple rallying too and thats because they were tracking the NDX and saw the bump. Headfake.
There is a lot ahead. A beige book. A fed meeting. The earnings calls and warnings in which Motorola and Sprint both announced bad news. If Motorola announces bad news, then what will Nokia announce, what will the chip makers for those phones announce. Lots of other reports. More fed speakers. Democrats and new policies in Congress. You know that it all isnt going to be good. Christmas is over, tax season and vacation months will be ahead. No one is going to be cheery.
The strategy needs to change because although the trend has not officially reversed, we are in a position where it might and very quickly. Look what one page from a fed report did a few days ago. The market is that sensitive right now.
Quote from Boib:
You're saying the Market Maker doesn't own the stocks he has in inventory?
I'm saying he can be 'FORCED" to buy stock. He is not a willing buyer and should not be considered a "buyer" of stock because when he is forced to buy the stock he will make up the imbalance with the bid-ask spread. None of us are in that position.
Quote from HolyGrail:
Apparently he doesn't short, he just stops buying which forces the market downward.
Let me guess, you actually think that a transaction has to take place for a commodity to decrease in value.
Let me put it this way. If 5-year-old Jimmy's lemonade stand is selling dixie cups of momma's good 'ole fashioned at $5 a pop and no one's buying, you think Jimmy might consider lowering his price?
Think supply and demand.
RoughTrader
Quote from HolyGrail:
I'm saying he can be 'FORCED" to buy stock. He is not a willing buyer and should not be considered a "buyer" of stock because when he is forced to buy the stock he will make up the imbalance with the bid-ask spread. None of us are in that position.
I'm assuming that if he is forced to buy that would be because there are no other buyers. Who is he going to sell to?
Quote from RoughTrader:
Let me guess, you actually think that a transaction has to take place for a commodity to decrease in value.
Let me put it this way. If 5-year-old Jimmy's lemonade stand is selling dixie cups of momma's good 'ole fashioned at $5 a pop and no one's buying, you think Jimmy might consider lowering his price?
Think supply and demand.
RoughTrader
I understand supply and demand, but you have to know more than supply and demand. You have to know the causes of supply and demand. So I then go back to my point. When everyone thinks the market is going up it will go down. Why? Because people sell into the strength of the demand, and vice versa. Thanks for proving my point once again.
Quote from HolyGrail:
I understand supply and demand, but you have to know more than supply and demand. You have to know the causes of supply and demand. So I then go back to my point. When everyone thinks the market is going up it will go down. Why? Because people sell into the strength of the demand, and vice versa. Thanks for proving my point once again.
With all due respect, reading that particular message of yours alone it sounds as though you're considering the mass psychology as the only factor that drives the market, when it is really driven by a multiple of factors, some of which are unbeknownst to even the most astute market observers.