Market of Noise

The momentum driven hedge funds have turned the market into a huge statistics and probability experiment. 60% + of trading is program driven. Many trades aren't even about the company in question; they are part of pair trades, index and ETF buys and sells. Hedge funds put together correlations expressing their ideas about relationships and this massive complex matrix is let loose on actual companies and investors. There's a lot of noise because many of the trades aren't direct statements of bullishness/bearishness regarding a specific stock, its just reactions to other shit firing off into the data space.

Everybody is feeling like the market has no memory day to day. Logical ideas and carefully considered thoughts about where capital should be moved are no longer rewarded. There is no such thing as a long trade; I don't even swing trade anymore. I sold every mutual fund and I don't like to hold ETFs overnight. I stubbornly hold gold, but the paper value via futures trading has totally abstracted the historical "gold is money" argument. Its a huge crapshoot.

That said I've been doing ok, and that's damn tough.

Well right now everything is going down, so that makes things easy. I scalp, sometimes both sides of the market (that is until I got caught on a QLD downdraft and decided to only scalp the QID dammit). DIG and DUG. I proudly extracted small change from LEH. QQQQ is below July lows today. March lows coming soon ? A bounce ? Seems logical, but logic hasn't been of much use lately.

I watch the components, TRIX, TRIN, VXN, oil, currency. Some day I will code up my ideas into cross market indicators. Or spend it all on a herd of yaks and return to the mountains where I belong.

The nature of holding investments has been steadily changing. Buy and hold is disapearing, we just scalp it as if to say in passing "yes, this guy ! great company !" or "due for a hair cut here" and then we are gone by the end of the session. We aren't going to get in a relationship. OK, that's a small segment of the capital. Retail investors (mom and pop) should leave already.

Maybe the next age of finance will be like cloud computing: money is allocated to investment vehicles and it swarms around in the most evolved and logical fashion. Humanity acheives an unsurpassed efficiency of application of capital.

Or more likely, the greedy are going to keep trying to suck the alpha out of the whole planet. Then they will leverage it further and suck the alpha out of the future (erm... aka debt) and then maybe progress to sucking the alpha out of yet to be discovered worlds and universes.

The age of human traders will soon draw to a close. It will only be algorithms. Now I would like to see algorithms with more meaninful inputs than momentum. It seems like once something starts to move it keeps going with a lot of force ("hey Long Oil Short Financials isn't working ! reverse hard !!!!").

I look at Oil and Gold and Solars going back up. Forget logic, the holdings and programs and churnings of hedge funds are more significant. We might as well direct all of our financial analysis to what THEY hold and when THEY are going to have to liquidate or reverse.

Did the PPT start the dollar rally ? Yes, and they pushed at exactly the right moment.