Market On Close - Friday 26 April

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Number Go Up, Number Go Down

by Alex King

Speaking personally, I became a much better trader and investor once I stopped trying to work out why price X had moved to price Y for any given security. To answer the question of ‘why did the price go up’, the best and only high quality response is ‘more buyers than sellers’. And the converse is true when the price goes down. If you can surrender any notion that prices are meaningful in any way other than as a function of what they were a moment ago or a week ago or a month ago, suddenly your mind’s perennial stack-overflow clears and more grey-matter compute resource becomes available to study what actually matters, which is price patterns.

In my opinion the best way to study the market is simply to sit in a quiet room with minimal distractions, by yourself, with a supply of fresh clean air and the caffeine stimulant of your choice (I am weak - true ascetics would have you drink only water from the nearest mountain stream!), having slept plenty the night before, and a few charts in front of you. Simple ones. Price only, no indicators other than volume in my view.

If you can do this and enter a Zen-like calm, low heart rate and all systems on autonomic, and repeat this for days, weeks, months, years, you can learn more about where price may move next, and what to do about it, than 20 years of business school or CFA tuition can ever teach you. If you get good at this then for a while this will be about making money. If you get really good at this - when you have enough money (and the wonderful thing about markets is, if you do it right, you can make enough money) - then it becomes just a number puzzle. You have one goal, which is, number go up. If number go up, good. If number go down, bad. Either way you should feel nothing.

This is the correct way to invest and trade, in my view. No elation on good days and no depression on bad days. If number went down, you made a mistake. (It wasn’t the market. It was you. You were positioned incorrectly, the market went against you, and you didn’t course-correct quickly enough). If number went up, you made the right decisions. (It wasn’t the market. It was you. Either you were positioned correctly, or, you weren’t, but you course-corrected in time).

These Market On Open notes are a lot of work each day, a good few hours’ worth of my time every day, but I find them invaluable, because it requires me to sit calmly and study each market - equities, bonds, oil, volatility - with fresh eyes and to try to account for the chart in front of me. I use these charts in my own investing and trading, every single day. I hope you find them useful in your own work!

Now, let’s get to it. Below we walk through our daily take on all four major US equity indices, plus treasury bonds, oil, volatility (via the Vix) and sector ETFs.

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Short- And Medium-Term Market Analysis