Tweet

Is This Stock Market Rally Believable?

Written by: Sean Hyman

Article Overview: I admit I am far too guilty of trying to rationalize what my eyes are seeing as the market seems to defy gravity and continues to move higher. I usually laugh when I see some respected pundit or the CNBC zoo-crew provide a reason for market movement (almost always after the fact) as the answer is usually never as complicated as they make it out to be.

Is This Stock Market Rally Believable?

The KISS Rally (and some other favorite aphorisms)

Keep It Simple, Stupid! I admit I am far too guilty of trying to rationalize what my eyes are seeing as the market seems to defy gravity and continues to move higher.After taking a "pause" last week and pulling back, it appears that strength has returned as the bulls outnumbered the bears to start the week.So what gives?

The short answer is-damned if I know.I usually laugh when I see some respected pundit or the CNBC zoo-crew provide a reason for market movement (almost always after the fact) as the answer is usually never as complicated as they make it out to be.In my younger days, I used to love to reply that, "there are more buyers than sellers" when asked why the market was moving higher.What is it about human nature that requires a need to know everything about everything?

It's almost as if people view the markets as some sort of clandestine enterprise whose secrets are shared by a privileged few. Let me reveal the secret-that's not it at all!

What the markets are is a series of micro-elections (buy or sell) that occur in a certain timeframe that reveal the collective will of the participants.The prevailing will determines whether the market is up or down regardless of a participant's reasons for holding any such view.Let's take a look at the charts of both the S&P 500 ETF (SPY) and the Nasdaq 100 ETF (QQQQ) to see what I mean.

As we can see from the charts, the bottom was formed on March 9^th and there has been a pretty nice move up. The market is always forward-looking but to me, the fundamentals just don't add up (yet).Well what changed in the economy to cause this rally to happen?

Then I thought back to some of the popular catch phrases that I learned as a youth in the business and it all started to make sense.Let's examine a few:

1. Don't fight the Fed!We have seen so far that the Fed and this administration is going to do just about anything (whether it makes financial sense or not) to back-stop the economy.The printing press has been opened and the money is flowing.So get out of the way!It looks like the shorts in the market have realized this and have helped contribute to the rally.



2. The market can stay irrational longer than you can stay solvent!This is a continuation of the first point but a lot of traders have problems with this one.The need to be "right" sometimes outweighs the consequence of being wrong.



3. The trend is your friend!As we can see, since the V bottom was formed, the indices have made a series of higher highs and lower lows, supported nicely by the 20 day moving averages (SMA).



4. Bulls make money, bears make money, and pigs get slaughtered!It is important to be aware that when a sustained move takes place based on no fundamentals, it is important to have a good risk management strategy in place and know where to pull the rip-cord on the downside.



5. Lastly, K.I.S.S- Keep it simple, stupid!Don't try to out-think the market.Take what it gives you.Trying to find the exact reason why something is happening is a fool's folly.Find a low-risk entry, employ money management techniques, and enjoy the ride!



As we can see, sometimes when trading the markets it is better to take a simple approach than a complex one.By "dumbing down" your approach, you could find yourself in profitable trades that you didn't even know where out there.

Related Articles
  Employment (NFP) Report and the Effect on Markets
  Different Types of Stock
  Its Obama's Economy Now!
  VI. B. Banking Sector Development: WHAT DETERMINES STOCK MARKET DEVELOPMENT IN AFRICA?
  Sacramento Financial Advisor Keith Springer Live on CNBC as an Expert Financial Analyst

Article Tags: amp, aphorisms, bulls, cnbc, etf, gravity, human nature, kiss, nasdaq 100, nbsp, participant, participants, popular catch phrases, pundit, qqqq, rally, short answer, timeframe, younger days, zoo crew



Related Forum Posts
Re: Do Women Play the Stock Market? - I also play Stock Market.....
Re: Do Women Play the Stock Market? - Thankfully, I do the finances in our household so there will be no surprises here! I cannot imagine not knowing what is going on. (In case you're wondering, my husband and I do consult with each other about major purchases though.) Until recently, I've only played a little in my RRSP's. I can't say I made any huge gains. I've done much better in real estate. My sister has done really well trading her RRSP's in penny stocks and if I remember correctly, she recently doubled her money in only a year. I'm hoping to change my own Stock Market record though! I got in on the ground level of a new green energy company in BC. It began as a private offering at 50 cents a share and now is offered at $1 a share only 3 months later. It's selling like hot cakes and will be closed to sales by the end of April (if there are any shares left). It was just evaluated by an independent company at around $6 a share. The company plans to be on the TSX this year and I expect to make a good return. Wish me well!
Re: How should i promote a new website? - ignore this message IF it's already been stated. I haven't had a chance to read all the replies and i have to jet from the office... I suggest marketing where ever your Target Market congregates. If it's a forum of concerned parents - go there. Strike up a deal with the forum owner (JV) and have him promote it to the list of members (Integration Marketing). If you want to go with Forums then i would partner with a parent who is a frequent poster/moderator on a particular Target Market Forum and have him/her add your link to their signature. That was just a thought but it's not as intense once you get buy in from the Forum owner or high ranked poster/moderator. Hope that sparks some new ideas.
Re: Ideas For Business - Hello Lucy, you may consider this list for Ideas for Business: (Top 23 list) Rank Company 1 Google 2 Genentech 3 Wegmans Food Markets 4 Container Store 5 Whole Foods Market 6 Network Appliance 7 S.C. Johnson & Son 8 Boston Consulting Grp. 9 Methodist Hospital Sys. 10 W.L. Gore & Associates 11 Cisco Systems 12 David Weekley Homes 13 Nugget Market 14 Qualcomm 15 American Century Invest. 16 Starbucks Coffee 17 Quicken Loans 18 Station Casinos 19 Alston & Bird 20 QuikTrip 21 Griffin Hospital 22 Valero Energy 23 Vision Service Plan
.. - We are the UK Market Leaders.....the first to venture into this on a huge scale. What makes this a success is the simplicity of the product and the price, very affordable to the mass market.


Share this article with your friends. Fund someone's dream.

Leave a comment below or share on the left and you'll help support entrepreneurs in Africa through our partnership with Kiva. Over $50,000 raised and counting - Please keep sharing! Learn more.

Tweet

Newsletter

Get advice & tips from famous business
owners, new articles by entrepreneur
experts, my latest website updates, &
special sneak peaks at what's to come!

Name:
Email:

Popular Articles

SEO Gurus, Software and Ebooks

Tips for the Novice Traveler

Why Use an Advertising Agency

Suggestions

Email us your ideas on how to make our
website more valuable! Thank you Sharon
from Toronto Salsa Lessons / Classes for
your suggestions to make the newsletter
look like the website and profile younger
entrepreneurs like Jennifer Lopez.