Thursday, March 26, 2015


Over the years, financial markets have evolved into a new creature compared to when my first foray back in 1990. One school of thought is prices are dictated by the economic financial factors and the other is the non-economic factors.

My honest observation is that I conclude cycles exist 1) when prices are in coherent state with the economic derived financial valuation according to textbook and 2)there is another cycle when prices will remain in a state that contradicts the valuations better known as IRRATIONAL.

Irrespective how we want to view the market trend be it align or non-align with our expectation per educated valuation it goes to tell us that IT DON MATTER what we think the valuation should be simply because market has its own agenda and direction.

This is the challenge that all financial educated based analysis will face because of the training and bias in thoughts.


Market trends is not driven by economic valuation alone. It is a combination of many factors. The most powerful factor is PERCEPTION and EMOTION.

Perception controls emotion and overrides the economics. Perception controls confidence. Confidence swings market trend back and forth depending which force is stronger. A state of range trade is a draw between the UP and DOWN forces. The one with the upper hand will lead the trend direction.

QE 1, 2, 3 did not weakened USD despite the many soothsayers on USD on the contrary USD gained strength. There is no sign it is letting down the "BULLS". Now how will the economics justify such ABNORMALITY? 

To be honest what I learned in school is when supply increases, prices drop. I can't explain this per textbook financial economics simply because the dogmatic theory cannot accept such situation.

Beware of what you know coz it is only half of the story.  


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