Seattle Bubble

So unemployment ends up being worse than expected and as of 7:19 AM PST we're trading at.....+176?



http://biz.yahoo.com/ap/081107/economy.html?.v=6

Yeah, that seems like a reason for the market to surge.

Lots of comments like this one lately. The market is so volatile now (up 10% one week, down 12% the next - up 4% one morning, down 5% that afternoon, up 1% at close) that nothing means anything right now. The wallstreet guys are just making stuff up each evening when they say "Investors, worried/elated about the price-of-gas/economy/unemployment/housing-market/election-results/solar-radiation pushed the market up/down today."

In other words, the market makes perfect sense. Everyone is running around like a chicken with their heads cut off, and in a market like that you'd expect news and performance to be completely unrelated. Putting cash into most stocks today is far closer to putting it on Red 29 than most pundits are ready to admit.

I have to agree, rcc. I don't like to catch knives....

It won't be until next year before this all settles down to something steady I think.

While that analogy is usually apt, I think today's environment might more closely be compared to running back and forth in front of a dart board, blindfolded.

while someone is throwing darts, right? jk

I guess I imagined it more like a group of drunks at a bar throwing darts, but year pretty much.

Really bad unemployment numbers and GM says they're about to fold. But we're up over 250 points at the end of the day!

You think the market is being manipulated? Naa, can't happen.

I honestly believe people are buying because they are frightened about missing out on a huge rally. Then, the bad news keeps coming in and they are frightened about losing more money so they sell. Perhaps there is manipulation, but I think that's a minor factor.

I also think the automatic trading (computers deciding what to do) is playing a part. Some common algorithm probably says to buy on drops just inside some X-day moving average. So you've got perhaps a band in which the algorithms think stocks will move, these trades might be contrarian often enough to push the market a little, and then anxious investors go "bad news but the market is up...maybe this is the rally" and they buy in.

We won't know what to think of this market until it settles down for a couple weeks. I have no idea when that will happen though.

If the market were being fully rational, this could happen because the market had been somewhat irrational in the days before, becoming oversold on the then-current news.

I agree with rcc that program trading is a factor. It was a big factor in the 1987 crash. I believe that suckers' rallies are promoted by the big shots, so they can sell into them.

I hate it when the media tries to explain the markets movements with a headline based on the biggest news story of the day, such as going "markets rally on new fed rate cut!" cause that's rarely ever the case. There are so many variables involved that it can't be explained by some headline.

My opinion on the market volatility right now is this. People who know what they're doing (mutual fund managers, analysts, etc) are buying like crazy because all stocks are so cheap right now and they don't want to miss the bottom. (Keep in mind that it's large institutions with millions of dollars being thrown around that affect market prices, not individuals doing they're own trading). On the other hand, you have the common people hearing about the financial institutions going under, so they freak out and sell they're shares of the mutual fund they own. So the same mutual fund managers that are trying to buy like crazy end up having to sell to free up cash so they're clients can take their money out. Some days, people don't freak out so much and the market rallies. Other days, mutual fund managers are strapped for cash and have to sell like crazy. I think it's random chance which one it will be each day at this point.

There's really no good way to explain the market on any given day.

The headline news "explanation" for the market move is almost never particularly useful, however.

It is somewhat useful to keep in mind that the market supposedly is looking 3-6 months in the future and that today's headlines are supposedly 'baked into' the price already. I don't know how true that is, but it its a good mantra to avoid focusing on the headlines of the day.

Its also useful to watch oversold/overbought indicators and technical indicators, which can at least describe what just happened, if not predict the future.

For example, right now we appear to be in a trading range between about 8000 and 9500 on the DJIA. The action for the past couple of days has flailed around the 20-DMA a little bit, so we should in the next day or two either get a rally to establish an uptrend or fall again back down to 8000.

The swings in the market are also getting a little less violent, and its taking longer to go between 8000 and 9500 which to me indicates that the market is getting closer to having "digested" that recent plunge, and we should be paying attention to look for trend changes (to the current sideways trend).

I still don't know why we haven't seen a decent short-covering rally..... With the market going sideways, though, it is starting to pull back from the oversold conditions without significantly rallying, so we may be in a continuation pattern and may break down again... dow 7000?

Bear Capitulation.

I stopped investing after every move I made got the wind sucked out of it by the chronic 20% swings in the financials (40% in the ultras) in less than an hour thanks to the Fannie/Freddie baliout, short bans, and other assorted interventions. I know numerous hedge funds collapsed as well due to these unplayable swings. Unless you are an insider, you have to stay out or get destroyed.

This is when the true bottom falls out, because there is no one hedging the market. Federal intervention in the markets has become so frequent that there are no shorts left of any consequence. This means that the current administration can no longer transfer wealth from the little guy to the insiders. This is why Goldman Sachs, Meryl, etc all turned from IB to bank holders, so they can get infusions directly from the taxpayer.

The only question is, will this continue under Obama? Given the massive donations from the finance industry to Obama and his Chief of Staff, I'm inclined to expect the worst, but given Obama's background, I hope for the best.

Almost got to the 8000 floor today before a 700 point rally which was based on... no real news.