Friday, 16 October 2015

Just the 'J' word

There is a word that has the same effect upon me as a taser. Well, let's be honest here, I haven't actually been tasered, though I did once decide as a child to see how quickly an electric fire element heated up by touching it, forgetting that though my reactions may have been fast enough to remove my finger as the element heated up, they certainly weren't fast enough to avoid the onrush of 240 volts of alternating current that would be coursing through the element long before its natural resistance caused it to heat up. The result was a scarred finger and a lifelong lesson in stupidity management that has born me in good stead through my time in finance.

As I explained to my mother, I was just trying to see how quickly the element would heat up. And there was the word. Did you spot it? It was the word that should halt (Taser, or electric fire like) everyone in their tracks as it is a word that is a preposition for a further string of words that, without this magic word in front of them, would sound so ridiculous as to cause the listener to choke on their own epiglottis.

And the word was ... just.

The mighty 'just' word. My wife and I do battle over the just word. In her case it is a word that achieves the holy grail of physicists and sci-fi nuts. Time travel. Or at least the ability to travel faster than the speed of light. In my wife's opinion prefixing any task with 'just' freezes time allowing her, when we are already late for engagement, to 'just' pop back indoors to make sure that the bed is made, kitchen clean, curtains made, jigsaw finished or War and Peace read' without in anyway further delaying us. 'Just' also allows us to depart from home in a 'just leaving' sort of way at exactly the time we should be arriving not to be more than sociably late, thus imparting us with the ability to travel faster than the speed of light. Which is 'just' incredible.

Of course I also have found the word to be of use in the war against the laws of physics. In my case I can perform Messianic acts such as turning half a pint of beer into eight pints by making it 'just a quick half'. I can also conjure up free cups of coffee (I was just passing), cross oceans in the face of hurricanes (just a light breeze), consume cakes without putting on weight (just one more), cure life threatening disease (just a cold) and even attempt to avoid criminal prosecution (I was just the president of FIFA).

But where the word is most effective is in finance where one can use it to limit all losses, for not only does the word 'just' freeze time, in doing so, it suspends reality. The monitoring of the use of the 'just' word is imperative and if the cleverest algorithms out there can spot word tone in Fed statements I am sure it isn't beyond them to count the occurrence of the word 'just' in financial twitter or IB chats and plot that occurrence against price trends. For I am damn sure that any move in the market that is accompanied by a preponderance of 'just' is going to just right royally screw the 'just'erers.

The dismissal of moves against ones views with the word 'just' is highly dangerous. Let's take today's equity moves. In fact, let's take the last week's equity moves. The S+P500 battled through 1995, failed again at 2022 with many crying 'triple top' and fell in what must have been one of the most predictable turns lower we have had for a long time (as previously posted here). This obvious move lower would naturally have attracted in short term players and confidence in a renewed down move was notable Wednesday morning. Since then we retested the 1990/95 area and have had a climb higher (tripping my previously stated trailing stop entry trades back into longs). Nasdaq was the first to break key areas around 4390, leaving SPX to battle the 2022 area that had previously been reaffirmed as a safe top. Whoops. Not only did SPX break but it has been tracking higher.

Now call me old fashioned but if I was to be short and see this happen I would be rather perturbed considering I have had three cracks at trying to go lower on old bad news and failed. But no. There is a very good reason for this rally - it is, apparently, JUST option expiries. So that's ok then. Does that mean that the loss on your book isn't really a loss? Or do you actually mean 'I have JUST shut my eyes and stuck my fingers in my ears going nahnahnahnah ignoring everything until after option expiry at which point I will open them again and pray to God that prices have fallen because at that point losses become real again? Or are you allowed another throw of the 'just' word to roll out your position on maybe a 'just people being silly', 'just stupid, I'm right' or a 'just you wait, one day Greece will implode, China blow up, gold become the only currency in the known universe and Northampton Town win the FA cup'?

If prices were just wrong for a simple 'just' reason then logic would suggest that someone with ample funds to do so would knock them back to the price they should be at. If that isn't the case then one of two things is happening. 1 - The price is not 'just' at a wrong level. 2- There is no one left able or willing to short the rally. Either of these scenarios should be of concern to a short with a 'just'.

Just now my just indicator is bleeping just madly. That just may not be the end of this rally and may just go on to cause a lot of pain. That may not be just, but it is fair.


globalmacrotrading said...


Talbakken said...

Great post, reminds me of being six years old and sticking wires into electrical outlets to see if I could "feel" any electricity in my fingers. My basic take is that the markets are simply grinding upwards and chewing through resistance at this point. Are things in U.S. equity land really that bad to get a renewed hard core bear case? China's GDP #'s Sunday night may have been fudged and may have been boring, but boring is kind of what equity bulls need right now. Bears continue to win a tie in this kind of back drop, and meanwhile those prior resistance levels are stiffening up as support....