We Got Our Answer – Risk On!

Yesterday I pondered what the markets’ reactions would be today, to the negative news of yesterday. I was wondering if the market would begin any kind of sell-off or turn on full Pollyanna and keep buying.

If you remember, I pointed out that Chinese stocks were getting clobbered by almost 4% due to their efforts to “curb” inflation. This was affecting the precious metals markets – as any sign of curbing inflation is negative for gold – and it was also weighing on base metals and other commodities – with China being the large marginal purchaser of resources, any decline in demand would likely send copper, nickel ,energy etc stocks down. On the opposite side, Europeans seem to be more comfortable and relaxed over their debt situation which was a positive sentiment for those interested in global financial tranquility.

However, in addition to the news above, I found out after I posted about Steve Jobs’ medical leave (get well soon Steve) – and when I saw that, I became very curious as that would be seen as another negative, and with Apple stock comprising a bit percentage of the Nasdaq index, a big move down there could have been another push for the exits. The market has done nicely since August and I’m sure there are many “trend traders” who would get off this trend and avoid risking their profits.

The result today?

We have a relatively flat market as of 11:01AM, a small influence on the Nasdaq from Apple, which is down 3.77% at this very moment, and not too much else going on – gold is up as I write this as are the base metals.

My Take

This is what happens in up markets – negative news is often ignored and positive news is cheered. The opposite happens in down markets – positive news is often ignored and every small piece of negative news is highlighted. As of right now, market participants are complacent and positive. Fed money printing is carrying on everyday (see NY Times article) so that keeps asset prices up. Right now, too many people fear owning cash as currencies worldwide take turns debasing and depreciating. Currently, it’s the Euro’s turn but perhaps people will perceive some stability there and then eventually send the dollar lower again.

Therefore, even though this market badly needs to correct, it may not! (Risk On!) My crystal ball has been quite cloudy recently:)

About Chris Grande

Note: Neither I nor any account I manage own or control and shares in any stocks mentioned in this post. See full disclosures HERE.