Mr. Spock Wouldn't Like This Illogical Market

 | Sep 11, 2017 | 1:17 PM EDT
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Once again, the illogical trade is working. The logical trade was to sell into the opening strength. The market never sold off much last week on worries about North Korea and the two hurricanes, so why should it rally much on news that neither is as bad as expected? Bad news was never discounted, so why should the fact that it didn't occur be cause for buying?

That sort of thinking is what has consistently confounded the bears. That isn't the way the market is operating. The action is not at all correlated to the discounting of news events. What drives the market are computer programs that embrace the path of least resistance, which generally is upward.

If you keep thinking about this market in terms of the news flow, you will constantly be out of step. The market is trading off price action. The editors will still come up with headlines to explain the action. Today they are mostly saying the rally is due to relief that nothing happened in North Korea over the weekend.


The market is up, and staying up, because too many market players were unprepared for positive action. Once the gap up started late last night, the die was cast. The bears were going to be squeezed and the dip buyers would be forced to chase. Whatever the news headlines might be is irrelevant.

Unless you were fully loaded long and on margin Friday at the close, you are likely underperforming today. I am, and I am not alone. That creates tremendous performance anxiety and the only way to deal with it is to either sit and hope the market reverses and allows entry at lower prices or chase some buys and try to put capital to work.

The illogical trade is working and if you don't understand why, you won't understand this market.

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