Pigs and Cattle

The game never changes.  Livermore was right.  Speculation is as old as the hills.  One day you have the crowd excited about more bond buying, this time in Japan.  The next day, the crowd is disappointed that it won't be enough.  Same story, different price action, different interpretation of the same news. 

Traders are like pigs and cattle.  They get force fed, not corn or hay, but news.  They eat it up as a source of guidance for the trading day.  Now we are gapping down, supposedly on "weak" China PMI data, as if that is a big surprise.  News is found to fit the price action.  If the market is gapping up, the media goes scouring for good news stories to headline.  If the market is gapping down, bad news stories.

There have been a lot of ETF fund inflows since the QE3 announcement, so the crowd is getting into stocks now.  After being lukewarm to the stock market since May.  I don't expect these inflows to last, because I don't see the rally lasting.  We are too high for a long lasting rally.   Retail will panic again when the market starts downtrending.