Who is the “market”? The market as you say is expecting this or that. As a trader, I expect and think the market should be reacting far more positively to economic conditions. I think you feel the same way. So who are the “they” that seem to be so schizophrenic about entering and exiting the market. Is it some small group of mega investors that want to control the market for their own purposes? And if so, are there warring factions in this group?
Market is a generic term we use to describe the major indexes in general, and more specifically the major investors that move the market. We use the term to describe the overall movement of the averages and the big money that is responsible for the major moves. It is not always an accurate characterization with respect to the indexes as some indexes can trade contrary to the majority of indexes in any given session. As for the big money investors, as they tend to leave footprints, it is more accurate.
Big money moves the market. when you have an index populated by multibillion dollar market cap stocks, the individual investor is not going to influence the moves. We simply don’t have the money nor do we act in unison as would a mutual fund or two or three or more. For a small stock with a small float that is a different story. Again, for stocks on the large cap indexes, the market is the big money, and the big money is controlled by the mutual funds, insurance companies, and pension funds.
With over 7000 mutual funds with managers that like to invest contrary to the market trend, with the market trend, etc, and hedge funds that like to do both at the same time, the action can appear schizophrenic, particularly at times of change in the market where they flail around, trying to find something that works. That can give rise to the high volume volatility seen in January and then again in April. When we see this we know those that are bullish and those that are bearish are fighting it out toe to toe. Once they are finished the trend will emerge. While they are fighting, it gets ugly and the action can be all over the map. That is a time for caution for us little guys because if a few institutions take the same path that can move the market a bit, but that can be thrown back by even more institutions going the other way.
We still laugh at how the ‘day traders’ and individual investors were tagged as the cause of the market volatility in the late 1990’s and early 2000. There is no way individuals had the clout to run huge market cap stocks up and down as occurred. Those were the big money institutions running around with hot pockets.
