Hair Trigger Market
- Posted by DynamicHedge
- on September 29th, 2011
The imperfect discounting mechanism we call the stock market often feels like it has a certain search and destroy mechanism built-in. The market does its best to fast forward to the good parts — whether that happens to be euphoria or depression doesn’t matter.
Big game hunting is an ancient event. Based on early cave scribbles, cavemanologists conclude that early man hunted Mammoth in large groups. Essentially, ganging up on the beast was the only way to take it down. The market doesn’t really care about the little guys like you and me. It’s looking for a trophy.
There is a big event on the horizon. Current market conditions are preparing us for its arrival. A great imbalance in the market must be corrected. I get the feeling that the persistent volatility will abate when a big game has fallen. Once the event is public and the panic is tangible, it will be over as quickly as it began. That’s what opportunity looks like. The volatility we’re experiencing now is conditioning traders and investors to fear action, so that when fortune comes knocking they won’t be there to answer.
I wasn’t trading when the LTCM crisis took place but I’ve heard the stories. They say the market dropped and the volatility was paralyzing. Then, when it looked like it couldn’t get worse, it went completely bidless and that was the bottom.
Try not to get too fried in the daily volatility. The real opportunity is right around the corner.
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DynamicHedge is an equities, futures and derivatives trader based on the West Coast. He runs a long/short opportunistic relative-value strategy within a proprietary trading group. More
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