Well….I am still long the Dow, boring that it is.
The interesting thing about markets at or around new highs is the emotional problems they seem to bring. Traders struggle with the notion of buying something that is higher than it has been in recent times simply because we have inbuilt cultural notions about what we believe something is worth. these ideas may be valid in our day to day life. If we wander into the bakery and a loaf of bread is $4.00 today and then it is suddenly $6.50 tomorrow we have a sense that we are being ripped off. In the context of buying bread this is a valid judgement, in the case of trading it is rubbish. Whilst preparing my notes for an upcoming AIA conference I came across some notes from an old AIA conference. In a particular presentation a presenter stated that he couldn’t buy XYZ stock because he thought it was overpriced and that his market price was around $4.00. The only problem was the market disagreed with him and had priced it an order of magnitude higher.This is the problem with having a narrative that is juxtaposed to what the markets narrative is.
If we accept that the current market price is the sum total of all narratives then by definition only the markets narrative is correct. Markets are essentially voting machines that vote on what story they think is correct. You may huff and puff all you want but if your story doesn’t agree with the market then you are going nowhere fast.
With regards to what I see with the current price action on the Dow.
The long term trend is still intact and volatility is still dropping – which is always comforting.
However, in the short term it appears as if pricers are consolidating, which really doesn’t mean much. Price will either move ahead and I can pyramid or it will fall in which I will exit.