Traders get frustrated when the markets go sideways. Everyday they try to predict if it is going up or down. Being wrong frequently on direction gets frustrating. Emotions take over. They look at the last 5 days and decide which way the trend is. And in a choppy sideways market, that can cut you down at your knees!
After 5-6 months of trending up from 9/15/10 to about 2/15/11, the market has paused for breath. That is totally understandable and expected. Markets do not defy gravity forever… so we settle down and say it is going sideways. But for how long?
What would trigger it to move again? The end of QE2?
I think that is factored in anyway and may very well be why we have been going sideways.
The beginning of QE3? Nope… we don’t think that there will be a QE3 per tea leaves reading from Mr. Bernanke
I think the market has to ultimately shift from the medicated state (ala Mike Santoli quote) it has been in, to surviving on its own. Is there enough steam behind the corporate earnings to now take on motion of its own? Probably for a while longer. We will find out soon enough. No one knows. Till then, let us just settle on that it is a sideways market. A pullback is reasonable before it continues its drive up. And so far the pullback has been extremely modest. Let me stop here and not over-analyze it any more. I got the picture. It is sideways.
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