The carnage continues in China with the market closing after 30 minutes of trading when it reached the 7% trigger point to close the market. That weakness spilled over into the European and US markets this morning, all of which are sharply lower.
One bright spot this morning is the that gold seems to be finding new friends that have pushed it up to its best levels in 2 months.
Why is all of this happening?
It all boils down to market perception. Perception is perhaps the most powerful force in the marketplace and the perception right now, no matter how irrational, is that investors do not want to own stocks. Investors were clamoring to buy Amazon when it was approaching $700 a share, now this morning Amazon is down almost $80 from its recent highs. Did Amazon's business model suddenly change? No, perception changed. Investors do not want to own Amazon right now as they think they can buy it lower.
The drama of the Fiscal Cliff and the recent sequestration circus, plus the trials and tribulations of these four countries (which have run up huge deficits) have been well documented and known for quite some time. What is more important, in my opinion, is not the size of the debt which is staggering, but rather what is happening in the market and the market's perception of current events.
Market perception trumps everything else out there. Market perception trumps market fundamentals every time. Market perception is the one card that the government cannot control. It is the card that can potentially give the individual trader an edge.
The trials and tribulations of these four countries (that have run up huge deficits) have been well known for quite some time. What is more important in my opinion is not the size of the debt, which is staggering, but rather what is going on with market perception.
How many times have you turned on your television or computer to see that Corporation XYZ is expected to make huge profits, but when you look at the chart it is telling you otherwise?
Who is right? How do you determine what to look at when you are preparing to enter a trade? Adam has put together this Trader’s Whiteboard video to explain the differences in information and to help you wade through the “noise”.
It is always interesting to live through history. However, I think many traders, or should say investors would probably like to forget about the history making market action on Thursday.
I just wanted to write a short post and show you where we stand with our "Trade Triangle" technology.
One of the advantages of using MarketClub's "Trade Triangles" is that you don't have to worry about the problems in Greece, nor do you have to worry about earnings reports, downgrades, supply and demand statistics, and all of the millions of other things that make up the price of a stock or a commodity.
An inescapable reality of the market, that effects all of us, is perception. This one characteristic can trump earnings reports, good news, and any other market changing force that comes out. For the last 12 months, the perception has been that things are getting better, and that pushed the market higher. Perception may have changed yesterday as investors are now once again beginning to worry about the euro, sovereign debt, and the value of paper currencies.