The swings of the past week serve as yet another healthy reminder that all markets work on a zero sum basis. After all Martin Scorsese called it the ‘Wolves of Wall Street’ for a reason – not the bears or the bulls of Wall Street. However the underpinnings of what may serve as sensationalistic backdrops for summer blockbusters are what we as traders need to deal with in real life on a recurring basis. And it is a reality (mostly) devoid of hookers, drugs, yachts, lambs, and entertainment slush accounts. Trading should be boring because as soon as things start to get exciting significant losses become a growing possibility.
I’m a bit pressed for time this morning due to social commitments, so let’s get right to it. Equities produced a pretty flat session yesterday with barely any signal on the Zero’s market participation signal. Now this is not unusual and we’ve seen days like this on a regular basis especially after snap backs to the upside. Early institutional dip buyers have done their part at this point and are now fishing for hobby bears they can rip to pieces in the following sessions.
This is not going to end well, folks. Barely a week after a massive wipe out in equities risk appetite apparently has returned with a vengeance. You may recall that last week I was musing about the relatively lackluster response in the Dollar and how precious metals as well as bonds happily continued downward while equities were getting the spanking of a decade. I am still not sure where exactly liquidity disappeared to last week but it seems that risk appetite has bounced right back.
Equities as well as cryptos are seeing sustained buying interest, which given the respective corrections over the past two weeks isn’t surprising. Bounces happen, especially after significant sell offs, and the main question in the minds of investors and traders is whether or not it can be sustained. I saw ZeroEdge claiming yesterday that Goldman had announced confirmation of a regime change in equities, and although I would generally agree I’m always a bit suspicious regarding anything that comes out of Goldman’s PR machine.