where is this gap up/rally coming from?

Discussion in 'Trading' started by 1a2b3cppp, Jan 4, 2012.

  1. The S&P gapped up yesterday (Tuesday). Why? Was there some good news or something?
  2. Does it matter?

    The financial media are the masters of causality, you should consult them.

    Today we can read as follows after an up day on Market Watch: "U.S. stocks mostly rose Wednesday as evidence of strong post-holiday shopping and healthy car sales in December helped assuage concern about Europe’s debt troubles."

    If today was a down day, the headline would probably have been something like this: "U.S. stocks dropped Wednesday despite strong post-holiday shopping and healthy car sales in December. Concerns about Europe’s debt troubles is still holding down the market and causing investors to worry."

    Perhaps the market is more technical than some of us like to believe? The market goes up when aggregate demand overcomes aggregate supply at a given price level and vice versa. Maybe that is the only reason we need to know and then simply trade accordingly? Maybe it is a dangerous game to start attributing reasons and causality to market movements that simply may be false?

    Just my humble opinion, anyway.

  3. I don't know. I can't predict direction. But sometimes I'm curious as to why out of the ordinary things like this happen.

    Had I known a big gap up was coming I would've gone all in the day before. I'm sure in hindsight now there's a reason.
  4. Also suprised by this rally. With 6E continuing to fall and the DX rising. What is propelling this market forward. Today France had a sub par bond auction and yeilds rose. While Italian 10 yrs closed at the high of the day 7.09. Last time yeilds were above 7% they were panicking. What is so different this time? Europe hasnt got its act together nothing has changed. Its worse now than it was 2 months ago. On a more technical basis, stochastics are at 92 on the daily ES. Very overbought conditions in my opinion. Thinking it will be sell the news on jobs # tomorrow.
  5. Off the top of my head two reasons. The press reported some strong industrial numbers out of China. Two, normal seasonal trends ( temporary in nature due to year end ).

    A third and perhaps more important reason is debateable, but the numbers someone posted recently suggested after flat years the market almost always followed up with a strong year. Only WW2 led to a 10% drop the next year. So if anyone believes that for this reason or valuation reasons that markets are going up in 2012, they need to buy now. I'm thinking mutual funds need to get ahead of the curve, I know here in Canada that many mainstream stocks ( eg banks, resource and metal companies ) sold off close to the bottom of their normal range in 2011, and bounced nicely off those lows the last couple of weeks. It looks very bullish for those stocks medium term, with the best entry points being a few weeks ago. Could it be some funds are already chasing those returns ?

    I was looking at heavily reinvesting in TSX and missed my entry again. The reason I hesitated is I think metals are selling off now, and that is somewhat of a weight on TSX. However, in hindsight, the rest of the market is such a bargain at 11500 area I needed to just jump in. That buying opportunity has been available for traders no less then 3 times in second half 2011, and was a profitable trade every time except for a small time window of less then two weeks.