Wednesday, May 26, 2010

Have we reached the bottom of a trading range?

As harrowing and seemingly significant as the recent stock market decline has seemed, the simple reality is that this has simply been classic Wall Street market manipulation by traders and short-term speculators seeking to push for as wide as possible a trading range. Sure, there was all sorts of talk about Europe and Greece and contagion and all of that, but the reality was simply that the so-called "professionals" of Wall Street were trying to sucker a lot of innocent retail investors into dumping their stocks, not for anything to do with longer-term economic and business fundamentals, but out of a raw desire to artificially push the stock market down in a trading range so that these "pros" could profit from short-term short bets against the market. But, now, that short-term push by Wall Street may all be over or nearing an end. Soon, the "professionals" on Wall Street will be "banging the table" about how cheap stocks are and how bright the economic outlook is for U.S. companies. Greece, European Banks, fiscal difficulties, et al will be once again pushed to the back burner and Wall Street will be "bullish" again. Did anything really change with the long-term fundamentals for stocks over the past month? No, not really. This was just Wall Street "business as usual."

The bottom line is that true investors can continue to ignore all of these short-term market movements. They are not based on the longer-term outlooks for the economy, businesses, and stocks, but simply a bunch of traders and short-term speculators artificially manipulating the financial markets. It should be illegal, but unfortunately it is not.

I don't mind traders and speculators playing natural market swings, but artificially creating unnatural market swings by engaging in fear-mongering (aided by an overly-eager and compliant media prone to yellow journalism) should be illegal, but for some reason is not.

Superficially, it might seem enticing to try to "time" the markets and play these short-term market swings for extra profit, but that's a game for traders and short-term speculators, not true investors.

For my own part, I am perfectly happy to simply ride out the storm, never selling in a panic nor buying in over-zealous euphoria. Simply stay the course.

-- Jack Krupansky


At 3:38 PM EDT , Blogger kengineer said...

Jack, I notice you do not post commentaries on the state of the WLI from ECRI anymore. Why is that? While others on the web have similar data, they are not as timely as you were; I miss those postings.

At 3:58 PM EDT , Anonymous Jack Krupansky said...

Thanks for reminding me. I stopped once ECRI was clearly indicating that we were out of the recession. But, now with the talk of a double-dip and ECRI going negative again as well, some subjective commentary is needed once again. I'll try to do a post soon.

-- Jack Krupansky


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