Hurray! Black Friday sales exceeded expectations – blew them away completely. People are spending again. The economy, it seems, has woken up from its hibernation, the future is secure, and we can indulge ourselves in that dinner out, that new dress, or that sportier model than we really need.
One of the first things you learn as a financial traitor is to mistrust euphoria. In the markets, it is too often a sign that the bigger players are looking to unload their stakes, and wish to do so without compromising price. This can only be done when they can sell to the smaller players on mass. This in turn, only happens when there is euphoria. What creates euphoria? The news! The players don’t need to create, or even manipulate this news (even though it is very much in their purview to do so). They simply need to wait for it to happen. That is, wait for the inevitable, and sell into it.
Returning to the sudden good news we are experiencing these days- the U.S. debt is still what it was, the Fed is still printing money to buy back near worthless mortgage backed securities, the logjam in Congress has not been swept aside, nor has the Iranian situation been resolved. In reality, all that has happened is that a small trickle of good news has loosened everyone’s purse strings.
One of the first rules of trading is that there is no sure thing – there are only probabilities. This unexpected upsurge may be legitimate, the harbinger that ushers in a new period of prosperity. However if I was a betting man, this is not one that I would take!