Feb
15
Reflecting on the Reverend Doctor Holiday Weekend, from Jim Sogi
February 15, 2008 |
On that dark weekend in the 1320 area Kerviel's trades started to unwind and drove the market down in some thin weekend markets. After the 50 Billion sale was done, the market recovered, and thus was an example of what Harris calls trade volatility. The idea is that the 1320 area was the so called fundamental support and the outside influence drove it temporarily down. The last test of that area confirmed that hypothesis at 1320.25. The question going forward is whether the same holds true.
As to your theory about the casinos giving out statistics to lead gamblers the wrong way, when disclosing the statistics, the gambit is that having the true information leads the gamblers to a wrong conclusion falsely believing the odds are tilting in their favor or that the table is not fair, when in fact the table is fair and the odds are not tilted in the gambler's favor. The markets can do the converse gambit and that theory is worth considering which might work as follows: Statistics are cited or historically develop to show how fair the system is, how normal the distribution is, when behind the scenes dark secrets such as Kerviel's evils, government announcements known only to the few before the market announcements and other overweight influences skew the scales of distribution and justice. This is one of the mechanisms causing outliers that come with greater frequency and theory would predict. Physic's evil genie in the gas chamber. That being said, that prior weekend's posts from the public bragging about their short profits were very telling, as are many reports of mass liquidations from the market lows on main street. As Bacon said, "always copper the public's bets."
Steve Leslie writes:
I have long since given up on trading options, futures and commodities. I just cannot find an edge in these markets that is profitable in the long run. It is akin, albeit on a much smaller level, to Vic and Laurel's disclosing that they do not trade the bond markets anymore. I understand my limitations. I also have given up on looking for significant or absolute lows or highs. Instead I look for the "tweens." This is the area after a stock has broken out of a long base and has begun an advance. Or I look for an exit after a stock has outperformed for a period of time and appears "tired." This works for me and I am content to play in this world. Sometimes I leave plenty on the table for the next guy and that is OK. Revisiting gaming and markets, I am not sure the comparisons that can be drawn. I think most gamblers understand the rules of games are fair, and "cheating" by manipulating a wheel or not using all 52 cards does not happen. Furthermore they know the inherent statistics are against the player's winning in the long run,and they apply to all who partake without passion or prejudice. I am not so sure that in trading markets or investing in equities that they are as fair or equitable. Certainly insider information, manipulation of information and trading occurs constantly. Some in this arena have a decided advantage, and the speculator should always be cognizant of such. In the long run, these abuses tend to be smoothed out. However it is the short run that can kill you if you are not careful.
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