by Gavin M.
Maybe the markets are hopeful. Maybe the economic problems of the world are saved. Maybe it's you. Maybe it's me. Maybe it's Maybelline. Have you gone out of your mind yet trying to figure out why these markets go up or down almost on a daily basis? Or better yet, the bear's dilemma: "Why are these markets up when every data point is so bad?"
I have had to really change my way of thinking these last 6 years. It has not been easy but I had to do it. I have had to accept that in this market - it's all about skewing the data to fit whatever rhetoric the big boys have. I can cite so many examples this week wherein trades did not go as expected. The RBA cut rates but the currency rallied anyway. The UK re-elected the Tories and sterling rallied. The US Jobs # was less than expected but high enough to keep everyone happy so we pushed higher.
I don't even want to mention the leaks this week. I mean I saw so many leaks it would make BP's Macondo incident look like child's play. But alas, this is the market we are in. Manipulation is the name of the game and exploitation is rampant. If you are not on the right side of the trade, you lose. By right side, I mean you should be on the BTFD side of the trade. It really has been the case over the last 6 years. If you didn't buy the dips, you didn't make the bulk of your profits.
The best part of this week was Yellen's warning about the markets being overvalued. When you have the head of the world's biggest central bank warning you of insane valuations and you investors push the markets higher - you know it is all over. It is this counter intuitive mentality we have in these markets that make any day trader just throw in the towel. Each day you are confronted with the dilemma of whether good news is good news or bad news or whatever the heck they decide to do that day. It really is that way. It can take a toll on some traders who dare seek out the truth rather than be a drone and BTFD each time it happens.
For most though, the BTFD method works well and they continue to be rewarded so far. For practicality's sake, I would expect them to keep doing that until the status quo changes. At this point the powers that be want people to think there are no risks to investing at these highs and that you should continue to buy some more. I find it the funniest because even Chinese regulators are trying to cool their super hot stock markets. Yet what do the markets in China and US do? They rise higher. When you have talking heads on CNBS even saying the markets can and will push higher, it really is an amazing time to be a trader.
In the end, despite what you may think or want, you just have to roll with what these markets are giving you. If they want to ramp, just trade it. If they want to fall, trade it that way too. Find what makes you happy and profitable and keep doing that until it won't work anymore.
Traders from Equity Sense will be writing on this blog on positions and other market-related things.