As I have said many times, the market is intent on making the most people possible look foolish at any given moment. This is especially true for market timers, who have a notoriously bad record in predicting outcomes. The best chance you have to get on the right side of the market is to examine the price action, determine the trend and go with the high probabilities of human behavior repeating.
There are many tools out there to help you capture the moment and decide on direction. Of course, these are based on historical evidence and high reliability, not certainties. Even in the world of fundamental analysis there are no certainties, though we should believe that in the long run the fundamentals ultimately win out.
When the markets are jittery as they are in their current state, we often see random action occur that is hard to explain. This past week saw Netflix (NFLX) rising up like a phoenix from the ashes to tag an all-time high, even though there was really no news to explain the rise. The stock flew higher by some 7% on pretty robust volume. News that President Obama and the former First Lady were going to produce a show on Netflix might have been the spark, but I sincerely doubt that was the reason.
The options market portrayed a very bright picture, for at least one buyer. When Netflix was trading at $332 on Tuesday, I noticed a $350 strike call expiring on May 25 was purchased 300 times at $0.22. With three days to go, this option had about a 7% probability of finishing in the money, very poor by any measure. Yet, by Thursday the stock had rushed past $350 and the option traded up to $3.50, a stunning 1,500% gain in just a couple of sessions. Sensational win! Now, while this may seem to be an anomaly, it happens more than you think.
Bond yields fell sharply last week -- even before the Italian political drama took hold. The 10-year U.S. Treasury yield dropped from well over 3.1% to close around 2.93%. The prevailing thought could be a safety trade, but with some inflation in the system and the Fed/others distributing bonds into the markets (and more robust auctions) it didn't make much sense. But it happened, and bond buyers made out nicely.
Markets do their thing and in the moment there is often no rational explanation, just random activity. Without the information to explain a move, many are driven batty, as the "need to know" is too strong. Down the road, we may find the true reason for price movement, but by then it's too late, as at the time it's more important to identify that something is happening and act upon it (or not).
I look at it this way: a random move in markets is great information backed up with a good technical analysis and chart read. I don't have to think too much about it, which often keeps me out of harm's way.