Friday 24 June 2011

Are we there yet!

For days I have been writing that the sell off is not over yet because the fear factor is not high enough.

The stock market is ruled by greed and fear. Unless we see high fear, verging panic, we cannot call a bottom. How many investors purchased the 200 DMA? It seems quite a lot. It goes to prove that one should not buy based on TA, however TA is very useful while selling. All the TA indicators have been screaming oversold, buy and what not and yet the fear factor was absent.
This is the only chart one need to know. The Eur/Usd.

Remember that the stock markets are price driven not news driven. News follow the price. The 24/7 financial TV and channels have to report something to stay alive and seem relevant. So they spin any news according to the price action of that day and time. If the prices are moving higher, they paint the news rosy and if it is going down, the sound bites are gloomy. But no matter whatever the MSM ( Main Stream media) say, it is almost always irrelevant and on the borderline of being false news. One should see the latest of Jon Stewart on Fox news.

Moreover, we always find that the big movers and shakers (some hot shot hedge fund manager or bond king ) comes and gives their opinion regarding the future of the market. Or Gsucks give advice to its clients which are made public. 9 out of 10 times, we can be sure that they have an agenda. They want to sell high and buy low and they will say the exact opposite of what they are actually doing. A healthy distrust of these people or recommendations are essential for survival in the jungle of the stock markets.

A case of point was the last hour rally in the stock markets yesterday,23rd June 2011. Basically the market rallied on headline and without reading or understanding the full context. As if Greece has really been fixed! Like some one yelling fire and people rushing out in panic. In this case it was greed. The retail investors wanted to catch some early windfall and the news barons, who are billionaires, added some more to their wealth. Today morning all that gain was given up.

I still think we need to sell some more, go down below the 200DMA and have a panic situation. Only then we can call a bottom. But in this manipulated market, one can never be sure. 

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