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Oppenheimer Holdings Inc. Message Board

  • superbmindset superbmindset Nov 19, 2009 10:08 PM Flag

    The New Forces Driving Market Prices….

    I was watching Meredith on CNBC the other day and couldn’t help but once again wonder the impact her views will have to the market.

    The market attracts some negative attention on these analyst’s bearish predictions on the economy and the stock market. The market drops on this perceived pessimism about the weakness of its prospects, and traders get in the action and sell. As volume picks up, the market breaks below all support levels, attracting technical traders. The downside momentum carries on day after day. Then it drops more sharply, strangely on a day when good news came out and the market failed to react. The market has a hard time retracing, and fundamental investors sell too, as liquidity dries away leaving the market to the mercy of short-sellers. The loss of market liquidity, sometimes unrelated to intrinsic fundamentals but nearly always linked to sudden market-wide realization of those bearish views, is an aspect that is often difficult to reverse unless you are able to regain "superb momentum."

    But how easy is it to break downside momentum when bullish views are now hard to come by? The lack of intervention and active participation by the “bulls” result in a free-ride to those who only analyze on weakness. The markets are now rife with analysts pushing the weaknesses of the markets-which they have obviously shorted. There is nothing like the smell of money, to perk one up and hanker for more. The problem, of course, is that they try to persuade, by swaying the focus on watching the prices and not on the fundamentals and dynamics behind the prices.

    I don’t say this today because Meredith is no longer with the company. And I also don’t say this today because the herd is now following the advice of the perma-bears. I say this, whenever I see the markets detach from fundamentals and I’ve been writing about this phenomenon since 2004-when the herd behavior of the market participants was following the bullish advice and was at a start of an asset bubble.

    To me, since March of 2009 the indicators pointed towards a "superb momentum" movement, as the recovery was at its start and we moved out of these oversold conditions. But today, yet again....these new forces are now driving market prices...

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