Rev Shark:
Traders: One More Time, but With Emotion
4/12/05 8:29 AM ET
"The opposite of love is not hate, it's indifference. The opposite of art is not ugliness, it's indifference. The opposite of faith is not heresy, it's indifference. And the opposite of life is not death, it's indifference."
-- Elie Wiesel
The most difficult market environment to trade is one in which the primary emotion is indifference. Indifference leads to tentative, uncertain and choppy action. When market participants are indifferent and uncaring, the market tends to move in a random and incoherent fashion that reflects those feelings.
It is when emotions are strong that good, tradable trends emerge. It is greed and fear and love and hate that makes for good opportunities. When market participants are emotional and full of conviction the opportunities to make money blossom. Unfortunately, that is not what we have to deal with right now.
The relatively flat action in the indices and the lowest volume of the year that we saw yesterday is strong evidence that market participants are feeling indifferent. They aren't negative enough or sufficiently panicky to really dump their holdings, and they certainly aren't confident enough to do much buying.
Can we blame them? There might be some interesting stocks with healthy fundamentals to consider for the longer term, but is there any rush to buy now? Crude oil has driven gasoline to record highs in most parts of the county, interest rates and inflation are seeing upward pressure, talk about "stagflation" continues to build and the technicians will tell you that there is nothing inviting about the current situation. Why would the average investor have any interest in risking his money in the market with these major concerns in the air?
The most difficult job for market participants now is to respect this indifference and not try to force trades. When there is little edge we can grow very frustrated trying to find one. We start gambling rather than speculating and rely on hope rather than analysis, simply because we want to stay busy.
The best thing that could happen to this market right now is for emotions to grow strong. It doesn't matter if investors become more negative or more positive, as long as they start feeling that they have to do something. I don't know what will be the catalyst for that but volume is going to be one of the key pieces of evidence in helping us determine emotions.
We have an indifferent start shaping up again. Oil is up slightly, overseas markets were mostly negative, and there isn't much positive news flow to wake up buyers. It is looking like indifference and frustration will continue to be the dominant emotions.
Gary B. Smith:
