hot potato

Discussion in 'Trading' started by dumb_mother, Dec 15, 2010.

  1. in my opinion the market is like playing hot potato. it seems like a believable storyline is thought of and then the market is pushed in that direction until the general public (of money managers) tries to leap on board the train where the smart money flattens up and doesn't care if the storyline holds any water over the long run. buy the rumor sell the news type of a thing.

    well if that is the case, i'm wondering if the santa clause rally can be explained because most money managers like to be fully invested come the first of january and look for their opportunities to beat the market at some point in the year. that being the case the market is pumped up through december so that the potato can be passed along at the end of dec / jan to those managers.

    now if that is possible as well, is this year a special situation where money managers were exceptionally uninvolved in the last quarter of this year, so they had to come in and buy here at the beginning of december- but since people on tv have been saying this for a while those trades would have been front-run already (ie the rally this past month) and now we are watching the potato being passed along.

    i dunno but this is the way i like to think about the market and it has worked for me pretty well for the last 5.5 yrs (although i trade bond spreads but the general theory still applies) this rally the last two weeks reminds me of the rally in january of i want to say 09 when it rallied a ton and then everyone got flushed out right afterwards (although that was during a bear market - *which we may still be in if it was a secular bear) regardless if this is a longer term bear (like 10+ yr time frame) then this could easily be the latest batch of bag holders who are getting involved right now.

    dollar is bouncing- we'll see what happens just some thoughts i was having and decided to share. anyone else notice the trends i site?