I find it amusing that every time the price of the market goes up or down, the information and media services companies, which cover financial markets, always find the right answer for this moves. I guess that's the news business market because people feel safe if they can make an association and 'know the reason', make them more prepared for the next time...:)
Frankly, I think is bullshit most of the time. For example, the oil market can go up because there is tension in Middle East or it can go down because there are too many rigs open in parallel with an excess of supply, or maybe the one of the many mammoth companies from the field anticipate a change in future prices and want to hedge their reserves or maybe lock the price for the next cycle using /CL futures contract...anyway the options are endless. The capital market is way to complex today to be able to find that reason which determined the move. What's more important is to adapt and be curious. Curious about how can you profit from this move, about what's the optimum option strategy to use.
One of the analysis methods one can use, is correlation. Maybe in the afferent sector one stock moved too much or too less, compared with the other stocks or with the stock/sector by it self.
More on this in a future post...
Peace
Frankly, I think is bullshit most of the time. For example, the oil market can go up because there is tension in Middle East or it can go down because there are too many rigs open in parallel with an excess of supply, or maybe the one of the many mammoth companies from the field anticipate a change in future prices and want to hedge their reserves or maybe lock the price for the next cycle using /CL futures contract...anyway the options are endless. The capital market is way to complex today to be able to find that reason which determined the move. What's more important is to adapt and be curious. Curious about how can you profit from this move, about what's the optimum option strategy to use.
One of the analysis methods one can use, is correlation. Maybe in the afferent sector one stock moved too much or too less, compared with the other stocks or with the stock/sector by it self.
More on this in a future post...
Peace
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