I'm posting this because I have a theory but I'm totally open to it being incorrect. I'm definitely open to learning new things and a good faith discussion.
Marco: There are big negative economic factors that have the potential to get significantly worse. A partial resolution of something negative (like a major trade route being closed) does not equal a positive. Even if the war is completely over and the straight 100 percent open on Monday that is not a great scenario. The great scenario would have been if the straight wouldn't have been closed in the first place. And the downstream effects of the closure will be felt either way.
Theory: Bad real life economics and lack of alternatives can fuel a rally.
Hedge funds algorithms can get in and out of positions faster than it takes for a light to go from human eyes to the brain.
The fact the party is ending soon (real world economy) is more reason for them to get drinks (profit) while they still can. Which makes sense if you can exit with your profits quickly without becoming a bag holder.
Hedge funds are also good at shorting so if they help create a bubble that comes crashing down they will beat the benchmark index (S and P) when it crashes as well.
They don't care if something is unstable and detached from reality. Profit from bubbles spends the same as profits from prudent conservative investing.
Lack of alternatives: The bond (debt security) market is trash. And gold looks less hyperbolic than last year. So there's nowhere safe and conservative that offers actual returns.
If the safe options are risk heavy compared to their returns the high return short term plays are less risky in a relative sense.
Takeaway: Stop looking at the news and stop trying to build a story that makes sense. It's a gamble to stay out of this market completely just like it's a gamble to go all in of this market. DCA all the way.
(None of this is advice. It's just hypothetical for fun)
TL:DR Nothing is safe anymore and order flow is disproportionately controlled by people who have very short term time horizons. No one knows or can predict when the other shoe will drop. And news is irrelevant if the market stops responding rationalely to news.
Change my opinion on why the market does not make sense.
byu/ScholarPrize1335 instocks
Posted by ScholarPrize1335
10 Comments
Bro, never said it did make sense.
Catharsis. Glad you thought through that one to the logical conclusion
Just buy index funds and leave it for 20 years.
Thinking that the markets *should* make sense is hard to unlearn but once I did it unlocked much better, happier investing and trading.
So your theory is market might go up might go down and you don’t trust the market and big money and economics don’t seem rational?
They cant get out of positions that fast. It takes a long time for them to build and unwind positions. This was a massive short squeeze, but then so was last April. Stupid market but it is what it is. I’m ready for a crash but I doubt we see it unless things go really south over the weekend
Watch out for stop loss hunt on the longs. All the institutions have to do is to create a little panic and retails will take the price down themselves
> The bond (debt security) market is trash
How do you figure?
40 years ago I came to the conclusion that markets don’t make sense.
Human beings have the identical emotional intelligence of chimps and decisions are based upon that. It’s *always* been a vibe market and the extremes are simply a reflection of where the pendulum is swinging at any given moment.
It’s already priced in