Conventional Thinking

is rarely rewarded in the markets which is why people try to be a contrarian. Thinking differently is often a good way to go, but when there is a strong trend I always prefer to follow it. Right now, the markets are in a very indecisive area, bulls and bears are jockeying for control. In this type of environment it is often a good time to take a step back and try to look objectively at the markets. Here’s my take (of course subject to change depending on market conditions). Why did the market selloff so hard this week? China? Economic concerns? I don’t think so, fundamental factors just don’t change that quickly. What does change quickly is perception of events and perception of risk. This market has been easy for the buyers over the last six months and they got complacent. When a little bit of profit taking occurred overseas, it opened the eyes of participants in our market and reminded us that there is risk in being long so they decided to do some selling. And the selling escalated to the point where it took on a life of its own, emotions started to drive the decisions of many participants and things got overdone. On Wednesday the story was that “everything was okay again”…until it wasn’t on Thursday morning and the market gapped lower once again, but this time buyers stepped in and saved a meltdown. Out of the corner of my eye, I see the market firming up again and I am thinking it is time to get long here because I think the worst is behind us for the short term and that a lot of people are thinking “no one wants to hold over the weekend”. I say, why not? What is so bad that could happen over the weekend? To me it seems too obvious that the market wont rally today that I want to bet against the conventional wisdom…..but remember, I am a trader and if things look bad I will exit very quickly!! Long the QQQQ at 43.02 **UPDATE** for those of you who emailed asking about this trade, it was stopped out with a SMALL LOSS, see comments below.