Dec

13

The fathomless, unpredictable, and ever-changing nature of markets never ceases to amaze me, and I’ve attempted to systematize it for the better part of each day over the past 40 years. For example:

A Complete Opposite. It is well known that when the Federal Open Market Committee meets the market goes up from the open about 80% of the time. Thus, guaranteed to happen, today the largest move ever below open, down eight S&P points at 1417.30 at noon, hovering down six from the open right before the “no change” announcement.

Quietly in the dark. The VIX stealthily set a three-month high on Dec. 7 at 12.67, but in a just three trading days it’s back down to 10.65 — a 12-day low, and a mere 0.77 above its 12-year low of 9.90 set on Nov. 20, 2006. I am reminded of my efforts to predict the market with a ratio of Amex volume to NYSE volume, with a level above 30% highly bearish, or odd-lot sales to total sales above 5%. Both ratios have averaged about 1/10th as much the old triggers, and have not been exceeded in 30 years or so. At least it didn’t keep me out of the market the way it did the Father of Fundamental Analysis, the prurient Benjamin Graham, who got out of the market in the early 1950s at Dow 400 because it seemed too high to him compared to the trigger level of DJIA 100 that bankrupted him in the 1930s.

The Round Number Game and Other Consiliences. The Nasdaq and the bunds are playing the round number game at 118.00, the former having moved above and below during on five separate days out of the last ten and the latter having moved above and below each of the last two days.

A Change of the Rear Guard. The Saudi Arabian market is the worst performer of the year, with the Tadawul down some 53% at 7837, but United Arab Emirates and Qatar are now down just 40 to 45%. The question that immediately springs to mind is how I avoided buying these markets that looked so oversold? The real answer is that I have learned that the cobbler should stick to his last. Helpful to me in that regard has been the remark of George Pollard, captain of the Essex when that ship was destroyed by a whale, after he ran his next ship aground on an iceberg. He remarked that he could be forgiven for the first disaster but after a second disaster he could be considered a hoodoo. Also helpful to me have been the many letters I received in the spring of this year, predicting and hoping for a repeat of my 1997 disaster.


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