In the many years that I have been trading there has always been someone arguing that the market is doing something that it shouldn't be doing. The argument takes many different forms. Sometimes it is based on valuations, other times its based on economics and, of course, the central bankers are given credit or blame for constantly moving the markets.
The favorite sport of many market pundits is to tell us why the market is moving in the wrong direction. They set out a long list of facts and then tell us that based on those facts the market has no choice but to change course.
The reality is that the market is all about emotions. Those emotions are influenced at times by the various arguments made by the pundits but there is no way to predict what herd of market players will do at any time. Throw in high frequency traders, computerized trading and other outside forces and it seems downright ridiculous to believe that you can use some form of calculus to determine what the market will do next.
On the other hand, the market isn't totally random. Human emotions tend to move in cycles which is why trend following can work so well at times. It is the nature of human emotions to go too far in both directions but trying to guess when they have become excessive is impossible.
Is the current market at an unsustainable extreme? Are current prices irrational and unjustified? Perhaps but there is nothing more important than the dicta of the economist John Maynard Keynes who supposedly said, "The market can remain irrational longer than you can remain solvent".
This irrationality of the market is too often used to avoid a market that may seem extended. I see quite a bit of this right now and, as I discussed yesterday, it carries a very high opportunity cost. There are all sort of good argument why we shouldn't trust this market but there continues to be trades that are working.
Arguing that the market is manipulated, irrational or just plain crazy isn't a good argument to not trade it. There are always good opportunities if you have the right mindset. Don't let the 'experts' scare you away from good trading.
We have a flat open on the way and not much going on at the moment.
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