The market is always forward-looking, said the pundit.
We were driving back from Steamboat to Denver and listening to satellite radio. It was noon coming through Kremmling in Grand County and the temperature was five degrees Fahrenheit, 50 degrees chillier than Denver.
And I thought, “Do these people pay attention?”
I like traditions. Thanksgiving. Anniversaries. Hieratic observances that remind us there are bigger things than ourselves. Skiing before the riff-raff gets to the slopes. Reading Federalist 41 periodically and then looking at our government and laughing.
But clinging to traditions like sell in May and go away and the market is always forward-looking while ignoring the geological upheaval in market form and function the past 15 years is inexcusable.
How can you say the market is always forward-looking when Citadel Securities is its largest volume-driver and its investment horizon is a day or less? Over 52% of all trading volume has an investment horizon of a day or less. It’s machines changing prices and profiting by sitting in the middle.
If you wonder if that pays, have a look at the stuff Ken Griffin owns. And Doug Cifu. And Vinnie Viola. Ed Bosarge (that’s quite entertaining, no offense to this innovative high-frequency trader).
The market cannot be forward-looking if the majority of its volume is living in the moment. The market then lives in the moment.
Do you follow?
It’s not just wrong to cast the market as a forward-looking. It’s dangerous. Take Transports, a classic subdivision of the stock market long used as a barometer of commerce. They’re trading at all-time highs. The thinking is a strong Transports group predicts economic prosperity. After all, it’s the machinery and apparatus of the movement of goods.
And how about retail stocks? I was just saying to the folks at EDGE, the decision-support platform built on market structure that we founded to help mom and pop traders out-think the machines, that retailers looked best.
That’s not because we examined all the data on spending patterns in the USA or concluded that folks would plow their latest Covid cash from the government into garments and furniture. No, it’s math. The short volume trend was down, and the ramp in Sentiment was the best of any sector or industry.
Son of a gun. Look at Overstock, Wayfair, pick your component.
But supposing that it’s anything other than math is supposing amiss. You can no more look at the market and draw a reliable economic conclusion than you can look at a forked stick and hope it leads you to water.
Unless you’ve been touched by the spirit, I suppose.
You get the point.
Transports? Sure, the stay-at-home pandemic culture enriched distribution channels like trucking and rails. AMZN isn’t a component of the Dow Jones Transportation Index (DJT). But a bunch of airlines and a rental-car company are.
You can try like all the pundits to come up with a rational reason for why the future is brighter than ever for Transports. And you can always find one.
That doesn’t make it so. The reason Transports are up is because they’re volatile. You can make a crap ton – to use an elegant Latin term – trading volatility in the moment.
Speaking of volatile, so is the outlook for Activism in 2021. It may be INTC is a harbinger of things to come.
If you want to know what that data looks like and how you can see it coming in your own trading, I’ll show you at the NIRI Twin Cities program this Thursday at 11a CT. I’m moderating a discussion on the data, the preparation and the battle – and why 2021 might bring the Viking raiders back ambuscading our ranks.
Back to the present. I’ve said it before. There are facts apparent to any observer about the stock market. More assets are passive now than Active. Citadel Securities dominates. Options trading is at records. Volatile is a plague. Short volume is nearly half the total.
When is our profession, the investor-relations discipline, going to adapt? Are these facts part of your regular communication to your boards and executive teams? If not, why not? If you’re ready, we’ve got the orbit, the data, the tools and the structure to help you keep your relevance in a right-now market. Have for 16 straight, unrelenting years.
The world moves on. We must too. We can’t be the last people on the planet to catch up. Now if you’ll excuse me, there are three planets upward in the sky I want to see (Jupiter, Saturn, Mercury, this week), moving onward, like time and the stock market.