The dynamics of the S&P-500 index on the first trading day of the year is very indicative in the sense that it reflects what is happening in the heads of market participants. In the morning, there is extreme pessimism (“everything is gone”, -1.5% on futures), which is replaced by optimism in the middle of the day (“not so bad”, + 2% from daytime lows), and indecisive closing (“tomorrow is a new day», + 0.1% at the end of the day).
It does not matter at all what kind of news flow caused such a dynamic. Now it is impossible to follow the news in an attempt to find a hint to our actions on the market — the headlines change every hour, swinging the «pendulum of emotions» of players with large amplitudes. And it will probably continue this way all year or at least the first half of the year. That is, you need to get used to living in conditions of high short-term volatility.
The most correct decision for the majority of non-professional investors is to determine their strategic portfolio and look there no more than once a week or a month. It’s not for nothing that they say that the most reliable way to reduce the volatility of your portfolio is to look into it less often. Save your nerves and money.
Traders and speculators, of course, more difficult. This approach does not work with them, they are trying to ride even short-term trends. But we must not forget that, in the marine terms, there is “flow”, but there are “ebbs / flows” and “waves”. So, even if we assume that the economy is still in the growth phase, that is, the “current” is directed in the right direction, then after all the major indices closed confidently below their long-term averages (200-day, 12-month) , came the «ebb». And it’s far from a fact that it has already ended. If you remember, at the end of December there was a series of posts about some extremely oversold indicators: the share of stocks in the index is above 50-day averages, a change in the index over 13 weeks, the sentiment of individual investors. All this is true, and it is precisely because of this set that the “wave” probably arose — the index has fallen down by -20%, and there has been an increase in the last few sessions. But you can not lose vigilance. Looking at the S & P-500 index, our subjective opinion is that while for him serious resistance lies in the zone of 2600-2650. The wave, which appeared after the sale, may well bring the index there, but then it may run out and the initiative will again turn to «ebb.»
Do not forget that no matter how attractive this or that action looked, its dynamics by 2/3 is determined by the dynamics of the whole market. And even if now something looks quite cheap, in the case of a «low tide» in 2-3 months it may become even cheaper (the company itself will not get worse). Therefore, it may be useful for speculators to leave a portion of the «powder» just dry for such a development.