Exploitation of fear

People fear when they should hope and hope when they should fear.   That summarizes nicely about the status of the market.  Back several weeks ago, when credit crisis at its highest, people piled so much money to time the bottom, now that, the crisis seems passed, and earning was not as bad as feared, yet people become guy shy to buy into the strength. 

 

It is understandable why people fear at this point, since the market perches at the high of the trading band and of course there is FED decision on Wednesday; however what stands out is how the fear manifests itself.  It is at the opening and closing when fear showed its ugly tail.  It is hard to say that the selling is well thought and systematically.  To me, they are more emotionally driven.  If that is indeed the case, then, this actually bode well for the market.

 

It is widely considered that the US dollar is strengthening, so, it is natural to think the commodity will fail (including oil), thus, it is quite suspicious why oil rallied today, Is this a bear trap?  Ok, there is bad news in the supply, but normally, people will look quite far down the road and discount present.  If this is truly a ploy by the seller to sell the shares to unsuspected buyers at a higher price, we can expect this rally will last for a couple days and reverse, and I will definitely look out for those signs.   

 

The seesaw market like today is the market hardest to trade, it invoke fears of losing money when it suddenly turned negative and fear of losing out when it turned positive.  You need a lot of conviction and discipline to trade in this market, if you buy/sell out of fears; you could loss a bunch of money real quickly.

 

For some highly liquidated stocks (daily volume in exceeding of 1 million), the solar stocks are the most volatile.  And it seems highly related to energy. For example, they uniformly are up today.  So, if you have good read on the energy, those stocks could server as short term trading vehicles.

 

Good luck