Thursday, March 12, 2009

Wall Street: The Stupidest People on Earth

Are the Stupidest People on Earth (Wall Street people/traders--excepting, of course, "journalists") about to strike again? The Dow has been up more than 150 points today, after a weaker start. This is about the level at which I have told you only the Stupidest People on Earth continue to by stocks (in a day when the market is already up that much). This is especially true when the market rose 380 points only a few days ago.

Remember when the market went straight up just before Obama's election? And then it went straight down to a low on November 20. Then it went straight up to a high (near term high) in early January. Then it went straight down again to a new current decade low. And during those big overall moves, since October the market has made these irrational, fictional swings up and down. Meanwhile, the actual economic news (since October) has not changed, except to get worse. These irrationally swings up--and down, although there is more news to support the down moves--merely indicate the market is SICK--nothing more than a computer gaming casino where computer, momentum trading uses "news" as an EXCUSE for momentum moves, rather than true investing.

Let me make clear here that I do NOT "short" the market. I am fully invested on the long side. I make money when the stock market goes up. I am making money today. Now I don't buy stocks at the top of these rallies (as only the Stupidest People on Earth do). But I am not a person hoping the market goes down. Unlike Rush Limbaugh and Sean Hannity, I also do not delude myself that the stock market means anything with regard to the overall economy. These people (stock market traders) are DUMB people. If you think otherwise, remember that the Dow reached an ALL TIME HIGH in October of 2007--a "mini-bubble". Those "smart" people on Wall Strett really knew what they were doing then, Rush, didn't they?

As I have told you repeatedly, I have no problem with the market going up. I like it. And I don't want ti do go down just to discredit Obama (although I think Obama is setting us up for a long term economic disaster. But I see clearly. Thus, unlike other people, I see that the Dow going up 500 points in a single day is a BAD thing--not a good thing. It is the sign of a SICK market dominated totally by computer, momentum trading. That means that same computer, momentum trading can knock the market DOWN 500 points in a single day (whether it "should" go down that much or not). This is unhealtlhy. It is much more healthy for the market to make rational moves, which means moves no more than 150 Dow points in a single day.

Since October, and this covers about 20 examples noted in this blog alone, all of these fictional (in magnitude) momentum moves have been a TRAP. That is why I call these people the Stupidest People on Earth. How can you continue to buy (or sell, on huge down days) after the momentum trading has taken over, when you KNOW that the momentum trading is going to turn around. Whenever stocks are up too much on a short term basis, or down too much, sellers (or buyers on down days) should come into the market because the buying is overdone. Instead--indicating the entire stock market is SICK--in recent months, and even recent years, every up and down move is EXAGGERATED. That is an irrational reaction, unless computer program trading based solely on momentum models has taken over the market.

Thus, I am telling you again. Only the Stupidest People on Earth continue to buy stocks on any day when the Dow is already up 150 points. That does not always mean that the market will go down the next day (look at those up moves prior to Obama's election, and at the end of the year). However, those huge momentum moves are still fiction, and subject to being reversed by momentum trading DOWN (and vice versa). Unless you are a day trader (day trading should be banned in terms of buying and selling a stock during the same day), It is insane to buy stocks at these fictional short term tops (or sell at short term bottoms). Even as a day trader, you are playing a game of musical chairs. If you can't find a chair in time, then you deserve what you get (as one of the Stupidest People on Earth).

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