The superstitious market

Img source: Corbis

Dear readers,

I have been plagued by the flu bug for days and I could hardly open my eyes while writing my previous post due to the flu medicine I took which is not very effective. I am still sick.

Pardon me if this post is badly written.

Here we go again. The sentiment on the worst is over 2009 will better just made it to the surface. Like what I have mentioned in my previous post “I just recalled the Capricorn effect“, as usual, people are expecting 2009 to be a fresh start.

The market is always superstitious.

Just recently, global markets took a rally on hopes the US economy will rebound from its diminishing state. There’s no rational reason behind this. It seems like the markets are betting on a sharp recovery in the US economy. I have never seen the market reacts in a logical way before.

The speculators created a very superstitious market which attracts the like-minded to further create a butterfly effect. You can Google for the butterfly effect, I will skip the explanation part.

The major economies are still suffering from the burnout in 2008 and it’s almost impossible for any economy to recover this early in 2009.

Nothing is concrete yet, it’s like hoping for rain when the clouds turned dark, it happens most of the time but looking at the damages done in 2008, the norm is unlikely to happen anytime.

I can’t blame the speculators to react dramatically to trivial news or news that have not been confirmed, or I should say rumors. Without the speculators, trading is almost unprofitable. But it seems like nobody is questioning if he is overreacting to a piece of news.

I too, trade when time is permissible but I am careful not to be dragged into the herd mindset.

Follow the crowd with your eyes open.

What I have just written may not be the best representation of my topic but hope you enjoy it.