Oh yes, the best things do happen while you're dancing. But is anybody out there besides the algorithmic trader and borrowers of zero interest loans still dancing? Hey, what's to worry, the 50 DMA is still above the 200 DMA and cumulative NYSE AD Line is still moving up. No divergences here so keep the music pumping and keep the Schlitz flowing out of the keg.
We've talked about manias and investor psychology many times before in this thread including how the best news seems to come out at the top. The warnings have been in place for months, the flash crash was written a long time ago. While the smart ones are getting out of the hotel California, politicians are grandstanding and trying to find a clue as to why the flash crash occurred. People want to know so they have an excuse for losing money on that day after getting stopped out. It's kind of like running a stop sign and hitting a car but blaming it on the other car because he was speeding. If everybody else lost money on the flash crash day, then I guess it's not so bad. (I actually made money on flash crash day.)
One thing I would like to mention is the lack of original provocative thought in not only the media, but the blogosphere world on the internet. Most bloggers cut and paste articles from mainstream news, add their own commentary, call it their own and collect adclick dollars. Another tactic of news mavens is to use charts or technical analysis as a crutch in their coverage. "If the market does this, we could be in for this, but if not we could have this happen". It's that sort of doublespeak that led to my decision to turn off CNBC on January 1st, 2008 and have never turned it on since. If a commentator turns out to be wrong, he can blame it on government or hedge fund manipulation of his chart pattern. Again, see above sentence about the car crash. Accountability is out the window and gurus only seem to take credit for the good calls while turning a blind eye to the bad calls. I sometimes wonder if they even learn from past mistakes.
Back to technical analysis, I do believe there is a place for it in every portfolio, but it is about as abused as alcohol in this world. Does it work, yeah, in small amounts like Jamieson; but overdo it and things get cloudy and convoluted, leading to devastating decisions. We saw the failure of technical analysis on the day of the flash crash, so let that be a lesson to the one track minds who see patterns in the clouds.
In the last blog entry, I mentioned the Shanghai market introducing short selling of futures into their markets. It appears that like the removal of the uptick rule in US markets, this rule was also introduced right at the top. This entire rally has been predicated on the idea that China (super growth power of the Milky Way) will carry us through our struggles and reinflate the growth bubble. China is not doing it, as indicated by a simple chart of $SSEC, and if they aren't doing it, we aren't doing it.
One final thing before I close. There was a good Bull/Bear debate this weekend that you may have missed at this LINK. You can start at post #535 and work your way down. The bulls are clearly on the ropes.
