Saw this on a blog:
On 11-July 2008 crude oil began its fall from glory and took all the markets down with it over the course of the proceeding 8-months. Crude got the ball rolling last summer and once again we see history in the process of repeating itself, to a slightly lesser degree. Crude's latest run peaked on 30-June above the $73 level and since then has done nothing but sell-off, dragging equities and commodities with it and boosting the dollar and yen as a result. How much of last summer's history is going to repeat itself? I can't say or predict, but I can clearly see desperation in these markets and the sign of desperation can mean things may get a little ugly and nasty in the near-term. But, it will not last forever...
Last summer as crude began to crack, the famous crude bull, T. Boone Pickens, went to great lengths to talk it up to protect his multi-billion dollar oil hedge fund. Last summer he was making claims about crude going to $300 and once again this summer he's out trying to talk crude up, saying it will return to $147. His attempts to stop the slide are purely out of desperation, it's obvious. Even the US energy department is trying to talk crude back up, saying crude will make gains toward the $100 level due to increased demand.
What can us traders take away from all this and from what we are seeing play out in the markets right now? First of all, because we know history repeats itself, prepare to see history repeat itself to one degree or another... the other thing is to look for continuing signs of desperation in the markets. Fear and desperation go hand-in-hand and as those two emotions work together to control the trading decisions of market participants, it usually means prices decline which translates into the type of selling we've seen over the past few weeks.
Now, there is a point where the fear and desperation reaches an unsustainable level, leading to reversals in price valuation and market direction. One of the best ways traders can spot that type of turning point is when everybody is saying its the end of the world, it's all over, and conditions have reached the point of no return. When it comes to markets and trading, the majority and the masses are always wrong, especially in the Forex market.
There is only one trend in the markets right now and that trend is emotion. The markets are running on pure emotion and history also tells us that when the masses are running on emotion, they ultimately make the wrong trading decisions. Their emotions act like some kind of weird mind control force that compels the masses to repeatedly pile into the last 5% of an overall market move. Just like when the S&P 500 and Dow broke the supposedly magical 200-day moving average the masses were screaming buy, buy, buy but the market went bye, bye, bye from that moment and hasn't stopped to look back.
As much as I loathe financial entertainment networks like CNBC and Bloomberg I have learned to use them as a resource to find out what the prevailing mindset is, what the emotional state of the markets are, and when the emotions of either fear or greed are reaching their climax so I know when it's most advantageous to do the opposite of the masses.
The S&P 500, Dow, and crude oil may continue in a season of selling and depreciated price valuations and obviously this would mean the US dollar and Japanese yen continue to gain ground on the majors and crosses, but I'm fairly confident in saying that when I see the majority of market participants and the masses join the bear side, I will know that the dumbest of the dumb money has piled into the last 5% of the market's move and hopefully I'll have the insight to know to run the opposite direction.
The masses totally got it wrong when they pushed the Dow Jones and S&P 500 to their all-time historical highs in the midst of the worst credit crisis and economic depression since the 1930's. The credit crisis began exactly on Sunday, August 12, 2007 and the US recession was in full bloom by December 2007, yet the equity, commodity, and Forex markets continue rising at an unprecedented pace. The US housing market was in full meltdown mode back in March of 2007 but the masses were still trying to flip homes, buying investment properties, and were taking out second and third mortgages.
It basically took a year for the masses to totally pile into the wrong side of every tradeable market on earth before the market itself ran the opposite direction and reversed on them. Traders can absolutely profit from playing along with the emotionally-driven masses, there's nothing wrong with that but don't lose sight of the very tried and true principle of all tradeable markets -- the longer things stay the same, the more they need to change.
On 11-July 2008 crude oil began its fall from glory and took all the markets down with it over the course of the proceeding 8-months. Crude got the ball rolling last summer and once again we see history in the process of repeating itself, to a slightly lesser degree. Crude's latest run peaked on 30-June above the $73 level and since then has done nothing but sell-off, dragging equities and commodities with it and boosting the dollar and yen as a result. How much of last summer's history is going to repeat itself? I can't say or predict, but I can clearly see desperation in these markets and the sign of desperation can mean things may get a little ugly and nasty in the near-term. But, it will not last forever...
Last summer as crude began to crack, the famous crude bull, T. Boone Pickens, went to great lengths to talk it up to protect his multi-billion dollar oil hedge fund. Last summer he was making claims about crude going to $300 and once again this summer he's out trying to talk crude up, saying it will return to $147. His attempts to stop the slide are purely out of desperation, it's obvious. Even the US energy department is trying to talk crude back up, saying crude will make gains toward the $100 level due to increased demand.
What can us traders take away from all this and from what we are seeing play out in the markets right now? First of all, because we know history repeats itself, prepare to see history repeat itself to one degree or another... the other thing is to look for continuing signs of desperation in the markets. Fear and desperation go hand-in-hand and as those two emotions work together to control the trading decisions of market participants, it usually means prices decline which translates into the type of selling we've seen over the past few weeks.
Now, there is a point where the fear and desperation reaches an unsustainable level, leading to reversals in price valuation and market direction. One of the best ways traders can spot that type of turning point is when everybody is saying its the end of the world, it's all over, and conditions have reached the point of no return. When it comes to markets and trading, the majority and the masses are always wrong, especially in the Forex market.
There is only one trend in the markets right now and that trend is emotion. The markets are running on pure emotion and history also tells us that when the masses are running on emotion, they ultimately make the wrong trading decisions. Their emotions act like some kind of weird mind control force that compels the masses to repeatedly pile into the last 5% of an overall market move. Just like when the S&P 500 and Dow broke the supposedly magical 200-day moving average the masses were screaming buy, buy, buy but the market went bye, bye, bye from that moment and hasn't stopped to look back.
As much as I loathe financial entertainment networks like CNBC and Bloomberg I have learned to use them as a resource to find out what the prevailing mindset is, what the emotional state of the markets are, and when the emotions of either fear or greed are reaching their climax so I know when it's most advantageous to do the opposite of the masses.
The S&P 500, Dow, and crude oil may continue in a season of selling and depreciated price valuations and obviously this would mean the US dollar and Japanese yen continue to gain ground on the majors and crosses, but I'm fairly confident in saying that when I see the majority of market participants and the masses join the bear side, I will know that the dumbest of the dumb money has piled into the last 5% of the market's move and hopefully I'll have the insight to know to run the opposite direction.
The masses totally got it wrong when they pushed the Dow Jones and S&P 500 to their all-time historical highs in the midst of the worst credit crisis and economic depression since the 1930's. The credit crisis began exactly on Sunday, August 12, 2007 and the US recession was in full bloom by December 2007, yet the equity, commodity, and Forex markets continue rising at an unprecedented pace. The US housing market was in full meltdown mode back in March of 2007 but the masses were still trying to flip homes, buying investment properties, and were taking out second and third mortgages.
It basically took a year for the masses to totally pile into the wrong side of every tradeable market on earth before the market itself ran the opposite direction and reversed on them. Traders can absolutely profit from playing along with the emotionally-driven masses, there's nothing wrong with that but don't lose sight of the very tried and true principle of all tradeable markets -- the longer things stay the same, the more they need to change.
15 YEARS OF PASR ON FOREX FACTORY!
