Market falling on debt ceiling-ooops
There is nothing bullish about a debt ceiling raise but rather bearish. Investors know that any deficit reduction means slower economic growth but they will do what they are told and that could very well mean going long. At 1,350 longs are currently ecstatic about the money they have made and will made while bears are in shock that new highs are moments away. If markets break higher people will ignore the reality of the global economy and will simply follow along, believing they are being true warriors, trading the tape before them not the tape they want.
Then out of no where the markets drops to 1,250 and the tide has changed. Bears are now ecstatic and bulls are in fear. Those warriors ready to trade the tape realize they don’t have the courage of their convictions. At 1,250 they would rather attempt to catch a falling knife and go long, the same knife they mocked bears for trying to catch at 1,350. Bears also having no conviction panic at the sight of the ES futures moving up and cover for a small profit, unwilling to hold for a big gain.
In rapid fashion 1,350 is presented yet again. The cat and mouse game continues. Bears are fearful, Bulls are greedy and those warriors are vindicated yet again. Besides emotionally exhausting all participants markets are instilling bad behaviors. The discipline of honoring stops, managing risk, taking profits, cutting losses are all gone.
The sole survivors of the coming market turbulence will be the true managers of risk, and there aren’t too many of those around….