Stock Market: Unhealthy Day

The thousand point rise in the Dow today, and the 200 point rise in the NASDAQ, were the sign of an unhealthy stock market.

 

How can I say today's stock market action was unhealthy, when so many people (including me) made so much money?  Easy.  I see things clearly.

 

Yes, the stock market was "oversold"--down too much on momentum and fear.  And Wall Street got what it wanted from governments over the weekend, and today (unhealthy itself, in its own way--see my entries since Saturday).

 

Still, the rise was simply too great.  3 to 500 Dow points would be expected.  1,000 points can only be explained by massive comuter trading (short term, hedge fund type momentum trading).  Obviously, the fundamentals have not changed that much since last week (nope, it is "irrational exuberance" to actually believe that the governments of the world have "solved" our problems over the weekend).  Even 500 point moves cannot be explained by fundamentals, but only by short term, momentum, computer trading. 

 

So hwat, you say.  Last week's excessive selling was not based on fundamentals either.  Why should we not gain back the same irrational way we went down?  No reason, except that is my point.

 

If computer, short term trading can boost the Dow a 1,000 points, then it can knock it down a thousand points (as it almost did more than once in the past 2 weeks).  That is not healthy.  It is knocking "investors" out of the market, in favor of the speculators trading nothing but momentum.  It is not healthy to have these kind of wild swings.  It would have been much better tor the Dow to go up 1000 points gradually, over the whole week, or even two weeks or more.

 

Okay.  Today has one healthy aspect, which makes it slightly--but only slightly--less unhealthy than last week's stock market trading.  Last week, fear simply took over.  We were in a "death spiral" of fear--fear induced by Wall Street and our politicians--not to mention our media--themselves.  That endless down spiral of fear had to end.  There has to be some hope that a day like today can break the cycle of fear.  The problem is that people observing these wild swings have to ask whether these people (on Wall Street) really know what they are doing.

The answer is "no", they do not know what they are doing.  And what they are doing is messing up the real economy beyond the actual problems in that economy.