hmmm… Cramer’s radio show yesterday was talking about how the market was a coiled spring, and good news caused two days of rally behavior. Others, too… lots of talk about upgrades and conference calls and oil/gold prices.
Well, I’m not the seasoned expert that some market commentators are, but I was expecting the markets to rally at the end of this week, due to options expiration, and nothing more. I came to this conclusion by asking myself: “how can the markets act to screw over the most people?”
I had to imagine lots of puts being bought, and lots of short sales, since we’ve been falling hard for the last two weeks. Everybody knows the markets are declining, right? So a little rally now will screw them out of a lot of money.
I should point out that I’m not just putting an evil anthropomorphic face on the markets. Whenever a lot of small traders take one side of a trade, a lot fewer bigger traders are taking the other side. Those more sophisticated, better capitalized traders (and specialists and market makers) are going to do whatever they can to make sure they end up on the winning end of the transaction. And, they have the money, the influence, and the savvy to do it. This is why, whenever a lot of smaller investors and traders are doing the same thing, the markets are almost certain to turn against them. A lot of times it’ll just be a temporary reversal, just long enough, and just big enough, to shake all the little guys and gals out.
Could I be right? Makes sense to me, anyway…