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Introduce Yourself Here - Don't Be Shy!!
trading4life posted a topic in Beginners ForumHello, My name is trading4life. I just joined this forum.
Big Moves Based on News
TopstepTrader posted a topic in FuturesLast Thursday, September 6, news came out before the Open that the European Central Bank would be buying the debt of troubled Euro-zone countries -- and the equities markets sky-rocketed on the news. It is said that the market hates uncertainty, and the uncertainty coming from Europe (that could drag down the U.S. economy) went down a lot with this news. The S&P mini's went straight up nearly all day on one of the biggest single-day moves of the year. You need to understand what's going on in this situation, besides the obvious. The first thing you need to know is that big players move the market, not small players (like us). When I buy 2-4 contracts of the S&P mini's, that doesn't move the market. But when Goldman Sachs buys 500 or 1000 contracts, not only will that move the market, but it gives a big signal which direction they think the market is headed. And when lots of big players are all on one side of the market, you get a day like last Thursday. When the market reacts like this to news, it's because the big players know the news will have a big effect, and that makes current prices suddenly very out-of-line with reality. So on Thursday they loaded up, and loaded up big. The thing I want you to learn is this: even after such a strong move up, the market is probably still not in line with reality and will usually keep going up. The way the market reacted on Friday is confirmation: the market moved sideways all day then went up in the last few minutes before the Close. Someone out there thinks the S&P mini's still has room to go up. This happens all the time in the stock market when a company announces much better-than-expected or much worse-than-expected earnings -- on the news a stock will have a big move up or down, respectively. For example, on August 15, 2012, NetApp announced better-than-expected earnings and the stock has gone up about $5/share (more than 15%) in the past 3 weeks -- see chart below. Notice the accompanying volume spike of about 3 times normal volume as the big players loaded up on the stock. In addition to the news from Europe, we may also get QE3 stimulus from the Federal Reserve. They say that the Fed chairman is politically independent, but I don't believe that for a second. Any sitting President of the United States will put any kind of pressure he can on the Fed Chairman to increase stimulus, which will help him get re-elected. You think that's going on in a tight election year like we have this year? You can bet the house on it. Put these things together and it shows the equities markets can still go higher from here. Many Profitable Returns, Trader Gregg Mr. Killpack has been studying the markets since 1988. He has read over 40,000 pages about trading and investing strategies, fundamental and technical analysis, and related topics. He began day trading in 2001. TopstepTrader http://www.topsteptrader.com seeks to find and develop undiscovered trading talent from around the world. While in our program, those who display a strong trading skill and aptitude will be backed as a fully-funded trader.