More headwinds yesterday, but expected. Both the DJIA and S&P 500 hit targeted support and firmed up at the close.

We should get a correction/consolidation here, before moving much higher, but I’d have to give a run at the DJIA 10,835 (S&P 500: 1155 ) levels a 50-50 chance. Before a more meaningful turndown. OK for nimble traders, risky for others, at least until the market has had a chance to digest its six-day, 5.5% upmove.

Today: Up 50 – 65 points at the open, a wave of selling between 10 o’clock and noon down to DJIA 10,420 ( S&P 500: 1097 ), then an afternoon rally.

Brooksie’s Daily Stock Market blog
-an edge before the market opens
Thursday, July 29, 2010 9:24 am EDT

DJIA: 10.497.88
S&P 500: 1106.13
Nasdaq Comp.:2264.56
Russell 2000:650.76

Jobless claims reported this morning were positive in that they were down a smidge, rather than up, which would have drawn the hysteria flacks back out of their caves to preach doom.

Investors Business Daily (IBD ) headlined, “Durable Goods Orders Slide 1%,” going on to note the report “defied forecasts for a 1% gain.” It included aircraft orders which were down sharply.

Bloomberg.com headlined “Durables Show Investment Picking Up,” going on to note that an increase of 0.6% in nonmilitary capital equipment, excluding volatile aircraft helped sustain the economic recovery.

How is the individual investor ever going to join this private party, with so much emphasis on the negative by some of the press ? (More tomorrow )

Why am I emphasizing this ?

To highlight the need to take what you read in context for what it is – political spin, sloppy reporting, whatever. Even so, it is hard to dismiss the mood the media stokes.

Unfortunately, the media has always had its bias. Getting on the right side of the market is hard enough without entities with a lot of influence spinning the truth.

George Brooks

Not unexpected, the market ran into some headwinds yesterday. Its tight, sideways consolidation during the day suggests a brief, sharp correction down down to DJIA 10,455 (S&P500: 1106 )before noon, then some firming, and quite possibly, the beginning of a surge to a new resistance level of DJIA 10,835 ( S&P 500: 1155 ).

There is a lot of institutional cash out there that must go into stocks.

While Durable Goods for June came in a bit below expectations, July could more than make up for that.

So far, Q2 earnings are better than expected, perhaps the Street expected that, ergo a sharp upmove this month. Toss in less angst about European finances, and a double-dip recession and you have traction you didn’t have in earlier attempts to sustain a rally in May and June.

The erratic swings in the market simply reflect normal uncertainty that accompanies a recovery from a severe recession/bear market. If it’s frustrating for you, it should be. You’ve been through a lot over the last two years.

Brooksie’s Daily Stock Market blog
-an edge before the market opens

Wednesday, July 28, 2010 9:25 am EDT

DJIA: 10,537.69
S&P500: 1113.84
Nasdaq Comp.: 2288.25
Russell 2000:662.17

The Mortgage Bankers Home Purchase Applications and Durable Goods reports will be factored into opening prices, but The Federal Reserve Beige Book* won’t be released until 2 pm. It is a survey of economic conditions in each of the 12 FR districts. It is a report of what happened and not a report of what is projected to happen, nevertheless, it is a good wrap up of the economy-to-date, and at times helps shape Fed policy.

I am sticking with yesterday’s headline, “Easy Does It – Bullish – Don’t Get Careless,” but add there will be plenty of opportunities to make money, many easier than those over the last 14 months. Don’t chase a running stock, use corrections or consolidations to buy. Bull markets last for years, this one has legs, but not straight up.

*Beige Book is short for “Summary of Commentary on Current Economic Conditions by Federal Reserve District.” ( Beige Book makes more sense than SCCECFRD )

George Brooks

Nice move, but volume was light.

Does this mean the sharp advance in yesterday’s market lacks conviction?

Actually, it is impressive that the market could press up that much without resistance. However, the real test will be, how far it can run when volume picks up.

Both the DJIA and Nasdaq Comp. broke through their 200-day moving averages, a bullish sign for technicians.

Worth noting, The DJIA, Nasdaq and S&P 500 all broke above the 200-dms in June before a nine-day, 10% plunge.

Today: It looks like we have a shot at DJIA 10,600 (S&P 500: 1130 ).

The real bonus here, is, odds are dramatically improved that the saw-toothed market action since the April peak represents a basing action, not a consolidation on the downside.

Not a 100% guarantee, but damn encouraging. I still see a trading range persisting into the fall with support closer to DJIA 9,880 – 9,990 ( S&P 500: 1045 – 1060 ). The upper end of that trading range is now in the area of DJIA 10,870 (S&P 500: 1155 ). Delightful !

At some point small and micro-caps will begin to sizzle. Be on the alert.

Brooksie’s Daily Stock Market blog
-an edge before the Market opens

Tuesday, July 27, 2010 - 9:24 am EDT

DJIA: 10,525.43
S&P 500: 1115.01
Nasdaq Comp.: 2296.43
Russell 2000: 665.22

While 29 of the 30 DJIA stocks advanced, none did so on volume greater than average daily volume. Volume was light for leading Nasdaq stocks, 23 of the 33 Nasdaq stocks that impact the composite by 50%, were up, none of the advancers exceeded average daily volume, though Yahoo (YHOO ) traded on par.

One of 12 leading bank/financial stocks exceeded average daily volume, but it was a downer. First Commonwealth Financial (FCF ) declined.

Let’s take another look at yesterday’s market action, as it defies logic.

Shouldn’t the market have encountered more resistance to its move, especially if it was going to advance 100-points ?

The DJIA was already up 3.7% in four days and entering overhead supply, as well as knocking on the door of the 200-dma.

It appears that a lot of selling has already taken place per four sharp plunges ranging between 6% and 13%. Then too, it has increasingly been dominated by big players.

Finally, the European sovereign debt worries and double-dip recession concerns are not “currently” dominating the news, so potential sellers are holding out for higher prices.

An increase in volume would reflect not just buyers, but sellers and a warning to new buyers to beware of a rally failure.

New home sales for June exceeded projections, though a 38% Q2 rise in foreclosures are having a depressing effect on house prices.

The Case-Shiller Home Price Index will be factored into stock prices at the open; Consumer Confidence and the State Street Investor Confidence reports come at 10 o’clock.

George Brooks
sensiblesleuth@gmail.com

Strength in the market over the last four days has increased the odds that the market action since the April peak is a basing action, rather than a consolidation prior to new lows.

Let me try to clarify how I feel here, because I think I have sent some mixed messages in recent days. I am bullish on investing in stocks and have pointed to an overwhelming pessimism as support for the market to go higher (darkness before the dawn, small investor wants no part of the market, etc. )

On the other hand I thought the market would have a more difficult time crossing DJIA 10,275 (S&P 500: 1085 ), at least without a consolidation first. It has done better than I expected and that makes my assessment at this point – partly wrong.

I think I have been on the money in terms of not chasing stocks after a sharp upmove per the extreme volatility since the April 26 high. Since then, the DJIA has rallied four times ( +12%, +6%, +9%, +9% ) and declined ( -13%, -11%, -6%, -10%, -4% ). It is currently up 3.7% in four days.

The major market averages are on the threshold of crossing their 200 day moving average, which would be heralded as bullish and could pop the DJIA to 10,600 (S&P 500:1130 ) near-term. Nimble traders can play such a move.

I would feel far more comfortable with a sideways consolidation before a breakout, but the market wants to run.

Brooksie’s Daily Stock Market blog
-an edge before the market opens

Monday, July 26, 2010 9:24 am EDT

DJIA: 10,343.72
S&P 500: 1102.66
Nasdaq Comp.: 2269.47
Russell 2000: 650.65

On July 20, I noted the biggest thing the bulls have going for them is EVERYONE, and especially the press, is overwhelmingly bearish.

In the eyes of the public and the press, there never was a glass half full, just half, or more than half, empty.

Obviously, no one informed the stock markets. The major market averages have soared since early March 2009 with the DJIA up 61%, the S&P500 + 65%, Nasdaq + 79% and Russell 2000 + 90%.

While recent economic reports have indicated a softening, the economy is in recovery mode.

The smart money used the worst of the news and depressed stock prices to buy well ahead of these stellar advances in the market, knowing if it waited for the news to improve, it would have to pay up for stocks.

I blame the press whose glass is always half empty. They know better, but given a choice between an upbeat, but truthful, and one that scares the crap out of a reader/viewer, they opt for the latter. Throw in some self-serving spin, and the public doesn’t have a chance. They have done, and continue to do, an injustice to the individual investor.

“The story” is, we have survived (by a whisker ) the worst economic and financial debacle since the 1930s, and stocks are still attractive, especially looking out a year or two.

According to a Bloomberg.com report, institutions increased stock holdings to 68% from 63% in July. Meanwhile pessimism among individual investors rose to 57% on July 8, the highest since the bear market bottom in early March 2009, according to data compiled by the American Association of Individual Investors (AAII ).

In fact, the last time the gap between institutions and individuals was this great was also at the bear market bottom.

Legg Mason Capital’s, Bill Miller calls this a “once in a lifetime opportunity to buy stocks of large U.S. companies.”
The BIG questions are, where will this market be when all this pessimism lifts ?

Is there room to run on the upside ?

I would think so, the DJIA is trading 28% below its October 11, 2007 bull market high when the unthinkable problems began to surface that resulted in a 55% plunge in the blue chip DJIA.

George Brooks
sensiblesleuth@gmail.com

The 200-Day Moving Average ( DMA ) is knocking on the door again.

A big deal ? Maybe, if the press makes enough noise about it and if Wall Street’s computers are programmed to react to a break ( or failure to break ) above this line.

Over time, technicians have observed a relationship between current prices and the average of those prices over the past 200 days. Generally, a break above is bullish, a break below is bearish.

Since the April high, the S&P 500 has broken below its 200-DMA five times and broken above it four times. Its last attempt was a failure to break above the 200 DMA on July 13.

Conclusion: beware of a breakout/fakeout. If it is going to have a meaningful breakout above the 200 DMA, it will most likely need some consolidation first.

Brooksie’s Daily Stock Market blog
-an edge before the market opens

Friday, July 23, 2010 9:24 am EDT

DJIA: 10,322.30
S&P500: 1093.67
Nasdaq Comp.: 2245.89
Russell 2000: 635.48

Yesterday was not the ‘blowout” I was referring to that the bulls need to start moving the chains on the upside, but it is nice to see institutions demonstrate they will buy stocks.

Just a guess, but I suspect big money spotted cocky shorts getting ready to take a victory lap, and they opted for a squeeze play. Additional buyers were drawn in when they saw the market soar in face of short covering.

What is important here is, there is a level where institutions, flush with cash, step in and buy, even in face of uncertainty and a softening economic recovery.

That level is generally DJIA 9,800 (S&P500:1020 ). So far they are unwilling to chase the market beyond DJIA 10,500 (S&P 500: 1110 ).

The Q2 earnings reports are a reminder that well-run companies offer an attractive place for an investors’ funds, and especially in light of the fact the United States has survived the worst economic debacle since the Great One, and a recovery, however slight, is underway.

That and the fact there is NO OTHER PLACE TO INVEST MONEY unless we get another leg down to test the March 2009 lows.

OK, try this. This is pretty basic, no intent here to insult anyone’s intelligence, but fast forward to 2011 – 2012. How much will a well-run company be making vs this year ? Is it undervalued now. If so, can an institution afford to have another institution jump in ahead and run its price up ?

Money managers compete based on performance, they have to own stocks. Expect them to be there when the market pulls back.

ABOUT High-Speed trading, algorithms, computers programmed to make decisions, etc.

Investors must adapt to a changing world for investing, one which could result in “gaps” up or down , which I would guess could be as great as 20% - 30% for individual stocks, all happening before you can utter your pet expletive.

We saw it with the May 6th “flash crash.” IMHO no safeguards will be adequate to prevent something similar from happening again. The SEC and heads of the exchanges didn’t see this coming ? What were they thinking; or weren’t they thinking ? Blinders ? Tunnel vision ?

In terms of investing, this is the big leagues ? This is national from coast to coast, beyond our borders. These kind of oversights simply CAN NOT HAPPEN ! This is where a world of investors feast on the big enchilada.

The major markets have been undergoing a progressive sea change for a number of years, but I suspect it is becoming more and more apparent in the increased volatility of trading of securities on our exchanges, which has become more like action at tables at Las Vegas.

Realistically, the use of computers for analysis and trading makes a lot of sense, and is actually a “must-do” to handle the enormous amount of trading volume generated by institutions as well as to compete here and abroad.

There is nothing wrong with employing algorithms to facilitate the analysis and trading needs of institutional investors, so long as it does not jeopardize the well being of the entire financial community.

If the use of these tactics overwhelms the ability of exchanges to maintain a fair and reasonable market for securities, it has to be curtailed, the interests of the masses are more important than those of a few.

Can anyone measure the damage that brief crash did ?

I don’t buy the argument that this high-speed, rapid fire investing provides invaluable liquidity. It can do the opposite. It can increase risk and jeopardize the best interests of investors whose sole interest is to put their money to work investing in a company that has the potential to grow their investment. This is especially true for high turnover intraday.

Can you imagine what will happen when we get an sudden piece of jolting news. I would hazard a guess that most of the computers will simultaneously SELL an unimaginable number of shares, where a human decision maker may defer selling, even look to buy.

Bloomberg recently reported that asset managers plan to increase the use of computer programs known as algorithms to execute trades in 2011.

The use of algorithms is expected to reach 35%, up from 29% in 2010. A human being at a brokerage house will execute a projected 35% of orders, down from 39%.

The good news:

There’s not a damn thing anyone can do about it, except learn to exploit the magnified swings in stock prices inherent in the volatility created by this high concentration of buying and especially selling.

This is a game of positioning, exploiting the swings up and down. This is true for TRADERS and INVESTORS. Both must time entry and exit. If they don’t it’ll cost them money.

NEVER HAS TIMING-IN AND TIMING-OUT BEEN MORE CRITICAL. That’s part science and part “art.”lThese guys are just magnifying the swings, and I kind of like that

I just worry about the average investor who has been told to buy and hold for the long term. If they are 60 years old, there may not be a long-term.

This volatility will spawn a rebound in mid-to-micro-cap stocks. Granted the risks are higher and there is a lack of liquidity in these issues, but the quants can’t play on this field.

Hedge funds can, however. In fact they do provide valuable liquidity in the small company market, because they have the smarts, money, guts, and permission by their clients to do so.

My concern is with the high-speed traders with high intraday turnover and a programmed computer making the decisions, not a human brain.

George Brooks

Looks like a positive open with the DJIA projected to gain 90 to 130 points by 10 o’clock. This is in spite of a rise in jobless claims for the week ending July 17.

The increase in claims exceeds the highest projection of economists.

Claims up - market up.

Make sense ?

Not based on past behavior when the market tanked on unpleasant surprises.

Positive reaction to bad news is normally bullish.

Like I said yesterday, the Bulls need a “blowout day,” without it, we will get rally failures – OK for nimble traders, but dangerous for the average investor.

Brooksie’s Daily Stock Market blog
-an edge before the market opens

Thursday, July 22, 2010 9:24 am EDT

DJIA: 10,120.53
S&P 500: 1069.59
Nasdaq Comp.: 2187.33
Russell 2000: 612.64

I must say, this market action is S-T-R-A-N-G-E !

It appears yesterday’s sell off was related to Fed chief Bernanke’s inconclusive comments, which occurred at a time when generally good earnings reports are being released.

Let’s step back a moment and look at the bigger picture.

Most consumers are playing their spending cards close to their chests. Their savings rate is up, borrowing rate declining, thus they are becoming more liquid. The economy will not get goosed big-time from this sector.

While unemployment/underemployment is anyone’s guess ( 9.6% - 15% ), some 85% - 90% of Americans are receiving a paycheck. Thanks to an overwhelmingly negative press, the consumer is only a little less concerned about the economy than when it was perilously close to a meltdown 18 months ago.

The consumer is adapting to the fact their net worth took a beating and an economic recovery will be slow and scary at times. But life goes on, just at a different pace.

Most of the corporate sector is a lot more healthy. Balance sheets have been tightened, and profitability, or the prospects for increased profitability, have improved. They will rehire people, but only when they have to.

The key here is, how reasonably are the stocks of these corporations valued, and more importantly how do those values compare to prospects 1 – 3 years out ?

Some of the BIG money will trade aggressively, repeatedly clipping a small profit wherever they can get it.

Others will invest for the longer term, and will be buying the undervalued stocks of companies whose future prospects are bright.

Investors big and small are trying to get a fix on valuation right now. Has a 30% plunge since the October 2007 bull market highs adequately discounted what has happened and the outlook for the future ?

I suspect that won’t be resolved for a number of months, but in the interim. I do expect a lively traders’ market.

George Brooks

The DJIA and S&P 500 declined sharply in early trading yesterday, but not quite enough to reach the support levels I targeted.

What is more, they closed slightly above my resistance levels, a one-day reversal in technician’s terms.

The driver here is what I expected – Q2 earnings. However, what I question is, will bearish investors use buying that accompanies the good earnings, to sell.

Today: Up at the open, but new buying risky. We need a "blowout" day on the upside, I don't see that right now. The bears have a lid on this market. Two things can overcome that - very heavy buying or time.

Brooksie’s Daily Stock Market blog
-an edge before the market opens

Wednesday, July 21, 2010 9:24 am EDT

DJIA: 10,229.92
S&P 500: 1083:
Nasdaq Comp.: 2222.49
Russell 2000: 624.24

This has been a slugfest between bulls and bears, with the latter ahead by a slight margin.

The market has not yet resolved whether we are in a consolidation on the downside, or a basing action that is solid enough to support a sustainable rebound.

At this juncture I think it is a mix of the two.
No, I am not trying to have it both ways !

1-We are in the middle of the worst time of the year for positive market action. Remember the adage, “Sell in May and Go Away” ? Traditionally, the best six months of the year for investing are November to May, and there are reasons for that but let’s move on, for now.
2-other than earnings, there is little until the fall to prompt aggressive buying.
3-the economy is softening, after an initial rebound, and the Street is watching to see that play out. I do not expect a robust rebound in the economy now, but the BIG money may be able to see strength in 2011 – 2012 in which case it may buy in coming months, rather than wait and risk paying up as the outlook improves.

Conclusion: Continued computer-generated volatility and a churning action with a better-than-average chance of new bull market lows (DJIA: 9,596, S&P 500: 1010 ).

Barring new and very bad news, I don’t see those lows as a major breakdown, but rather a slight penetration, before another trading rebound.

This is a nimble trader’s market and extremes must be worked.

George Brooks

Looks like an early test of minor support in the area of DJIA 10,105 (S&P 500: 1066 ).

Resistance starts at DJIA 10,205 (S&P 500: 1078 ). I think the DJIA would have a tough time crossing 10,275 (S&P 500: 1085 ).

A test of more significant support at DJIA 9,860 (S&P 500: 1036 ) is a greater possibility.

Today stands to open off about 50 – 75 Dow points.

This is a trader’s market, but requires more than the usual patience, meaning a trader may have to wait longer than normal for a lower price when buying and a higher price for selling, since it appears to me the moves in both directions are magnified, probably by the computer decisions.

The biggest thing the bulls have going for them is EVERYONE, and especially the press, is overwhelmingly bearish. The bulls are only lacking a catalyst to reverse the slippage in the market. They may just have to wait for several months and be content with trading the volatility.

Brooksie’s Daily Stock Market blog
-an edge before the market opens

Tuesday, July 20, 2010 9:21 am EDT

DJIA: 10,154.43
S&P 500: 1071.25
Nasdaq Comp.:2198.23
Russell 2000.: 613.08l

Normally, support/resistance levels don’t change as frequently as a stressed chameleon changes colors, but the quant-driven volatility is in the driver’s seat, and will be until the profitability of ultra, high speed/accelerated intra-day trading burns out.

Under normal conditions, these levels tend to mark turning points and are a guide for investors attempting to fine-tune trading. An investor may elect to sell at a resistance level, or defer purchase. An investor may buy at a support level, or defer the sale of a security.

A breach of one or another, stands to result in a continued move in the same direction, sometimes a significant move.

However, if the overall investment environment changes in the interim, these levels may become meaningless. The increased use of computer programs to make decisions, may change how the market responds to these levels. The huge swings in the overall market may be reflecting that right now.

I suspect these computer programs will be comprised of similar algorithms and therefore become readable to the nimble trader, ergo be a positive, so long as they don’t all say “SELL” at the same time.

Presently, I think we will have to wait until fall for the beginning of a sustainable uptrend.

Weakness in the economy makes sense at this time. We survived a total global meltdown in 2007 – 2009. The rebound from that was partly induced by government stimulus, but cannot be expected to be too robust, since so much damage to the economy’s core was done in the Great Recession.

The stock markets are in the process of digesting all this, but the jury is still out.

Odds favor the market will have to work lower until a comfort level is reached, perhaps several comfort levels, as data streams in from the various sectors of the economy.

George Brooks

The correction that started Friday with a 261-point plunge in the DJIA must find support at 9,860 (1036 for the S&P 500 ), or the July 1 low of DJIA 9,596 (S&P 500: 1010 ) is at risk.

Brooksie’s Daily Stock Market blog
-an edge before the market opens
Monday, July 19, 2010 9:24 am EDT

DJIA: 10,097.90
S&P 500: 1064.88
Nasdaq Comp.: 2179.05
Russell 2000: 610.39

Since the “flash crash” low of DJIA 9,787.51 on May 6, there have been four sharp rallies, coming off three declines.

DJIA:
Rally: 5/6 to 5/17: +11.9%
Decline: 5/17 to 5/25: - 10.9%
Rally: 5/25 to 6/3: +6.1%
Decline: 6/3 to 6/8: - 6.0%
Rally: 6/8 to 6/21: +9.3%
Decline: 6/21 to 7/1: - 9.7%
Rally: 7/1 to 7/12: +8.8%

Each rally erupted from a level that was marginally lower than the one preceding it, kind of a breakout-fakeout, whereby investors were prompted to bail out upon seeing the prior support level penetrated.

This is incredible volatility, almost a war between heavyweights, and I have to say the bears are ahead on the scorecard.

While the bullish money managers are loaded with cash that must be put to work, they don’t earn the 7-figures because their clients need write offs.

If they see a chance of a nosedive, they will stay on the sidelines and buy-in at lower prices.

Aside from the fact stocks are fundamentally cheap, and there is no other place to invest cash, the bulls only peg to hang a hat on now is corporate earnings, and it doesn’t look like that is working out very well.

The bears have two things going for them. A media that is hopelessly focused on the negative, and the time it will take for the Street to get a handle on how long it will take for the economic recovery to resume, if it is going to, at all.

Without all that cash on the sidelines, I have no doubts that the bears could orchestrate a harrowing tailspin.

All that said, there is a chance of a “flush” down to DJIA 8,880 ( S&P 500: 940 ). Right now, I’d give it a thirty percent chance of happening, bearing in mind the market has tended to rebound shortly after a penetration of a recent low, which in this case would be DJIA: 9,596 ( S&P 500:1010 ).

This is a traders’ market, but you better be very nimble to play.

The Fed, Treasury, administration and responsible business and investment community parties have attempted to rescue the economy and stock market from utter disaster. The early returns suggest they are achieving their goal, but a lot of damage was done between 2006 and 2009.

George Brooks

We got a 120-point sell off yesterday, just as I expected. What I didn’t expect was for the market to recoup just about all its day’s losses by the close of trading. The S&P 500 actually closed on the plus side.

After seven straight up days, it clearly wasn’t a stretch to expect the market to correct downward or swing over into a sideways consolidation, especially with the economy showing signs of slipping, and most of the commentary increasingly gloomy.

Today: Down at the open. The major market averages are on the threshold of breaking up above their 200-day moving average, which would be seen as bullish and trigger additional buying.

Today's attempt to sell off will give us a read on how ready the market is for such a breakout. Support is DJIA 10,320 (S&P 500: 1092 ).

Brooksie’s Daily Stock Market blog
-an edge before the market opens

Friday, July 16, 2010 9:24 am EDT

DJIA: 10,359.31
S&P 500: 1096.46
Nasdaq Comp.: 2249.08
Russell 2000: 634.62

I have been looking for a consolidation per my July 9 blog, ranging between DJIA 9,750 and 10,550 ( S&P 500: 1020 - 1125 ).

While this is what the market may be tracing out, I am very surprised it is so persistently rising without the help of heavy volume. It acts like the early stages of the February - April, 14% surge, which was also accompanied by unexciting volume.

It seems to be the only indicator with a correlation to the economy that is strong.

Nevertheless, if there is one indicator I respect for running ahead of the crowd, it is the stock market.

My conclusion is what I have said so many times, but which never gets “ink” is there is simply a lot of money that MUST be invested for clients by money managers.

But, unless they are certain they can buy-in at lower prices, they have to buy stocks, especially after corrections of 10%+.

This kind of action may be driven by computer programs, which don’t have the eyes and ears to deceive them. This may be a pattern we must adjust our entry and exits to. Hello !!

I have repeated that ad nauseum, but it’s a fact of life. At some point, today’s worries will vanish, stocks will sell at higher levels, and investors will have to pay-up to play.

There you have it. Buy low - Sell high ! Sounds easy, but honestly, just about everyone has to admit buying now, as was buying in face of uncertainty, or a discouraging economic outlook is difficult, especially if you have limited funds.

More than ever, I think investors will have to tailor their investing decisions to the patterns set by the huge amounts of money run by computers. I think I can handle that.

Currently, it appears moves up and down run a bit further than before computers dominated. I also think computers, and especially one’s programmed by today’s quant culture, will render the historical comparisons of certain indicators less reliable.

More specifically, the use of 50 - 75 years of data to draw conclusions for the projection of the current direction of today’s market may be misleading.

Human emotions have, and will continue to have, an impact on stock prices, especially at extremes, but decisions are increasingly influenced by how computers are programmed to think. More and more, the market will march to a programmer’s drumbeat, not a money manager making decisions on the timing of buys and sells.

End of investing as we knew it ?

NO !

Just a different environment we have to adjust to. Read Scott Patterson’s “The Quants” to get an inkling of what is here now and what lies ahead.

This bodes well for the small-to-mid cap markets, where computerized trading will not be as concentrated.

George Brooks
I plan to relocate this blog. If you want to be informed of that move contact me: sensiblesleuth@gmail.com