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Why does the market defy rationality?
- Thread starter dearinfinity
- Start date
The market trades not only upon what is KNOWN... but also what is hoped for, anticipated, and feared.... even when the market turns out to be wrong about its concerns.
I've seen times where the market anticipated "something" and made a move on that ancipation..... later concluded they were either wrong or severely mis-timed.... and gave back nearly all of the "anticipation move"....
Other times, the market moved apparently irrationally... only to be correct later on.
Bottom Line.... the market WILL try to anticipate... sometimes correctly, sometimes wrong... but you won't KNOW which it is until it's too late to capitalize on it.
Trade PRICE... it's you best shot.
I've seen times where the market anticipated "something" and made a move on that ancipation..... later concluded they were either wrong or severely mis-timed.... and gave back nearly all of the "anticipation move"....
Other times, the market moved apparently irrationally... only to be correct later on.
Bottom Line.... the market WILL try to anticipate... sometimes correctly, sometimes wrong... but you won't KNOW which it is until it's too late to capitalize on it.
Trade PRICE... it's you best shot.
Trade PRICE... it's you best shot.
Quoted From Above Post
I agree. Trading price action and using technicals are the only ways I've found success in this market. Price action is everything. People who ignore price action and trade fundamentals often get caught buying the news just as the market turns tide. No matter how you trade, you need to pay attention to price action.
Quoted From Above Post
I agree. Trading price action and using technicals are the only ways I've found success in this market. Price action is everything. People who ignore price action and trade fundamentals often get caught buying the news just as the market turns tide. No matter how you trade, you need to pay attention to price action.
My trading philosophy expressed as a paragraph. Taken from Technical Analysis of Stock Trends 8th Edition Edwards&Magee:
"The technical analyst may go even further in his claims. He may offer to interpret the chart of a stock whose name he does not know, so long as the record of trading is accurate and covers a long enough term to enable him to sudy its market background and habits. He may suggest that he could trade with profit in stock knowing only its ticker symbol, completely ignorant of the company, the industry, what it manufactures or sells, or how it is capitalized. Needless to say, such practice is not recommended, but if your market technician is really experienced at his business, he could, in theory, do exactly what he claims."
"The technical analyst may go even further in his claims. He may offer to interpret the chart of a stock whose name he does not know, so long as the record of trading is accurate and covers a long enough term to enable him to sudy its market background and habits. He may suggest that he could trade with profit in stock knowing only its ticker symbol, completely ignorant of the company, the industry, what it manufactures or sells, or how it is capitalized. Needless to say, such practice is not recommended, but if your market technician is really experienced at his business, he could, in theory, do exactly what he claims."
the market is doing just what it is supposed to do. making it hard for stubborn shorts to get out and hard for bulls who missed the rally to get in.
Quote from lindq:
This is why the "efficient market theory" is so wrong. It generally states that everything that is known is already priced into the market. But it leaves out of the equation an important factor often influencing pricing, which is expectations. And they aren't quantifiable.
This is not correct at all. At any one point, the market priced in what could be priced in. Market price includes and is moved by expectations, which is quite within EMH.
However the market is a living, breathing organism. Expectations are not something easily quantified or rationalized, and they change with every report and for other reasons.
The trail of bodies left by the market, in spite of the many ET folks, internet vendors and others claiming great success, is a very strong testimony to the efficiency of the market. Whether weak, strong or otherwise efficient depends on the times, the opinions of its detractors & adherents, etc. etc.
Quote from TraderZones:
This is not correct at all. At any one point, the market priced in what could be priced in. Market price includes and is moved by expectations, which is quite within EMH.
However the market is a living, breathing organism. Expectations are not something easily quantified or rationalized, and they change with every report and for other reasons.
The trail of bodies left by the market, in spite of the many ET folks, internet vendors and others claiming great success, is a very strong testimony to the efficiency of the market. Whether weak, strong or otherwise efficient depends on the times, the opinions of its detractors & adherents, etc. etc.
How does one accumulate rougly 3000 posts in 1 year?
On Feb 28th I was telling most of my clients to start getting long even though I felt we would have one more push lower (lower then the march low) I quailfied that by telling them the need to build some sort of floor on their long positions to anticipate the push lower. They asked me why not wait for the low. I responded by teling them that if Im wrong (which of course I was but no harm to my positions) that the market would be up 15% in a week and they would end up waiting for a pullback that would never come and before it was over they would have missed 25% because Bear Market rallies are absolutely astounding because you dont have the shorts selling and you do have the buyers buying.
So, right around now you will get the funds starting to pile in because they want to make sure it looks good that they didnt miss the rally but as you know the funds usually get in near top.
If you look to the street right now, they are absolutely devestated, like how could the market have moved that fast and left me here sitting on the sidelines.. so, they are doing what got us here.. Greed and stupidity.
Dont get me wrong, I think the longer leg of this rally has a ways to go, though even myself I am questioning why have not gotten a decent correction yet. We will and when thats done.. Look out for a major rally.... Before we most likely top everything out in the fall and head for new lows.
Please read, the old standby "Extraordinary Popular Delusions and the Madness of the Crowd" by Charles MacKay, for a much more in depth profile of the herd in question.
Will the market top in the fall.. I believe so, but will of course investigate whether or not there were any fundamental changes in our economy to justify a DOW back at 10-11K. Right now, i am betting no.. but we will see.
So, right around now you will get the funds starting to pile in because they want to make sure it looks good that they didnt miss the rally but as you know the funds usually get in near top.
If you look to the street right now, they are absolutely devestated, like how could the market have moved that fast and left me here sitting on the sidelines.. so, they are doing what got us here.. Greed and stupidity.
Dont get me wrong, I think the longer leg of this rally has a ways to go, though even myself I am questioning why have not gotten a decent correction yet. We will and when thats done.. Look out for a major rally.... Before we most likely top everything out in the fall and head for new lows.
Please read, the old standby "Extraordinary Popular Delusions and the Madness of the Crowd" by Charles MacKay, for a much more in depth profile of the herd in question.
Will the market top in the fall.. I believe so, but will of course investigate whether or not there were any fundamental changes in our economy to justify a DOW back at 10-11K. Right now, i am betting no.. but we will see.
Quote from dearinfinity:
Specifically, why are financials and REITs surging on the homebuilder index, while mortgage foreclosures are soaring and the moratoriums are ending?
You can also say the same EXACT thing about natural gas as it relates to the land-based NG drillers like HP and PTEN.
The stocks are breaking out even though May Nat-Gas is in the dumper and continues to make new contract lows . . .
If you don't believe me, punch up a chart of Helmrich (HP).