Thursday, October 20, 2011

Managing Money in a Manic Market

Right now the market is being jerked around by headlines that change by the hour. At 3pm on Tuesday, a story broke about a deal between Germany and France, and the market soared in the last hour of trading. Then about 5 minutes before the close, the story was refuted and the market quickly turned, with selling continuing into the next trading day. The yoyo swings are probably attributable to heightened macro tensions combined with computer-based high frequency trading that seems to exacerbate every move.

This note off pretty much sums up the way things are working right now. (My highlight in yellow).
Mis)managing Expectations: No EFSF Leverage Decision To Be Reached This Weekend
Submitted by Tyler Durden on 10/20/2011 - 10:41
Headline time:
  • German ruling coalition sources say EU summit will not reach a decision on EFSF leveraging
  • And since the catering has already been paid for, "German ruling coalition sources says EU summit to go ahead on Sunday" even though no decision will come out of it.
Now... spin? Or another headline in 10 minutes refuting this one. Stay tuned and don't touch that dial while we break for commercial.
At Pinnacle we don’t get hung up on any one piece of news that hits the market. Instead we rely on a process that weighs evidence that builds over time. While markets are whipping back and forth, we realize that the business cycle doesn’t turn with one data point, technical conditions are a complex set of many different indicators, and valuation is a slower moving measure which matters most at the extremes. Our process weighs all the news and data, but keeps us from becoming day traders who obsess over the latest rumor to hit this manic market.