Chasing rainbows and jumping at shadows

It pays and saves to observe where the noise is coming from.

Furthermore, it’s wise to identify where the most crowded trades are.

In the past weeks, the froth which appeared in the financial media included;

Oil rising from $94 to $130. It’s now $96, which is the same price when Russia invaded Ukraine.

Gasoil (diesel) futures contract rose from $900 (on February 24, 2022) to $1,665 and its now back to $900.

Wheat went from $8.40 to $13.60 to now trade at $10.50.

The price of Rotterdam delivered coal went from $193 to $460 only to fall back to $312.

Since February 14th, the Hang Seng market fell 27%. It’s now 15% higher than this week’s lowest point.

It goes on and on.

A lot of money has been made and lost on these moves, both and up and down. For those of the correct and wrong side of the trade. Some were Long and others were Short.

Now that Oil has fallen 30%, I don’t hear the media fervour in the same manner as when it was rising.

Apparently when Oil was at $120, it was going to $200.

A couple years ago, when Gold last touched the $2,000 market it was on a one way path to $4,000

Remember when Bitcoin was $60,000, “the noise” was gearing us up for $250,000 or $500,000.

Reiterating that journalists (and the pundits) are merely reporting the news which has already occurred, it’s important to remind yourself that they aren’t market participants.

Canny investors and traders position themselves before the news is reported.

Today, I see the Hang Seng market up 16% in only 2 days. Over the same time, the Nasdaq has risen 6.8% and the S&P 500 has advanced 4.3%

Stocks such as Alibaba and Shopify have climbed 34% and 17% respectively in the past 2 days.

On other note, this doesn’t necessarily make me happy because it just shouldn’t be doing this.

You shouldn’t crank out 1 year of gain from an index in only 2 days.

Be careful, everywhere.

Do your own thinking and ignore or filter the noise.

Markets go to where they can do the most damage.

That can mean up or down. It can hurt you if you are short or long at the wrong time or price.

It can hurt you when they go up, if you aren’t invested and then decide to chase the train which has left the station.

It can hurt you when you sell your stock at its lowest point because the pain is too much to bear and your investing horizon suddenly changes from years to days.

Be careful when chasing rainbows or jumping at shadows.

March 17, 2022

by Rob Zdravevski

rob@karriasset.com.au