Predicting the Future in Real-Time - Understanding the Dow (6/30 1:20 PM EST)
THIS IS NOT INVESTMENT ADVICE
I am not a licensed investment professional. What follows are my personal opinions and thoughts which I will use to determine my own trades. You should always consult a licensed investment professional before putting your money at risk and you should never believe anything anyone says on the internet.
Thursday, June 30th, 12:53 PM Update
As of 12:53 PM the Dow is doing some pretty interesting things. It started up slightly (25 points) but has steadily gained momentum since. It seems to be gunning for the 17,900 level mentioned in my linked post. The market is still a ways off from the magic number of $18,135.50. Had the market opened up big, as it did the last couple of trading days, this number would have seemed achievable especially if that opening was followed by the same steady rise we have seen so far today.
17,900 Is The Number To Watch
That being the case, the 17,900 will likely be the more important number to watch. The Dow is now at 17,887.15 (up about 20 points since I started writing. Let's see if it flirts with that 17,900 number. If it breaks through it, continues rising, and closes above it this will indicate future strength (moderate increases) but not a breakout (a dramatic rise) and so I will personally consider buying shares in a Dow Jones Index Fund. If it fails to reach that number and then fails to close above it, this should be a signal of weakness and buying shares in such an index would seem unwise.
Possible Trades
I suppose one could short Dow Index Funds in this situation to make money when the price drops, though I would prefer to indirectly short by buying shares in an inverse ETF which effectively shorts the Dow like Short Dow 30 (ticker: DOG). These types of trades seem to me, however, too risky and too technically sophisticated for me. I like to KISS: Keep It Simple Stupid. I prefer to look at these situations as opportunities to wait for the asset to drop in price and then enter long positions from there once the market indicates strength. This seems to be a less risky approach.
Of course, the $18,135.50 number is not totally off the table. Market moves that big can happen at almost any time, they're just rare. A closing above that will always signal extreme strength and a potential run of the Dow all the way up to 20,000 in September. A closing below 17,120 (also extremely unlikely but theoretically possible) would indicate weakness and further movement down.
1:20 PM Update
The Dow broke through 17,900! It got all the way up to 17,911 before heading back down to the current price of 17,897.77. This baby's going to keep us guessing till the last minute whether it's going to close above or below 17,900--the number I discussed in my post written at 3:00 AM when the market had previously closed at 17,691. If it fails to close above 17,900 it would be a good time to leave any long Dow positions because it might head back down, though that is by no means guaranteed. We're talking probabilistically here. If, however, it closes above 17,900 (as always) it will likely continue to rally into next week, though it isn't likely to skyrocket.
3:00 PM Update
The Dow broke though 17,900 again! This is a good sign that the Dow might close above this level and signal further strength in the week ahead.
Closing Update
Armstrong's numbers are absolutely miraculous. His software is just ... otherworldly. As I said before the markets opened, 17,900 was one of three numbers to watch (17,120 and 18,135.50 being the other two). When the market opened slightly up and then continued a steady upward trend I updated the post stating, "It seems to be gunning for the 17,900 level," and that 18,135.50 was too far off to be likely.
At 1:20 I added another update announcing that the Dow had broken through 17,900 and that it looked like, "This baby's going to keep us guessing till the last minute whether it's going to close above or below 17,900." I was wrong. It kept us guessing till the last four minutes! In those four minutes she went from $17,897 to a decisive $17,929.99. A mere ten minutes before close she was well below the magic number at $17,874. But the earlier indicators of strength were not lying and she made sure to close well above our number, thus signaling strength. The Dow should, therefore, continue its upward movement next week. But only time will tell!
PHEW! That was a fun ride! Crazy to watch markets move like that, call what is likely to happen in the future, and then see it unfold in real time. However, I am not ruling out the possibility that today's performance was luck. It was fun, that's it. Only continued performance will prove skill and knowledge as opposed to dumb luck. Sure was fun though! I doubt it's as exciting to read :/ Might have to figure out another way to present this.
Personifying Markets
I hope it's obvious to everyone reading this that I do not believe that markets are conscious entities that have any real "wants" whatsoever. These terms are simply helpful analogies for referring to market behaviors which can often be surprisingly accurate. My argument would be that while the market is not conscious it is the aggregate of the price-beliefs which those trading it possess. It is the numerical expression of the countless experts who determine its price. In this sense it is a conscious entity. As Donald Hoffman pointed out in his Ted Talk which I shared earlier, reality is merely a "vast network of conscious agents simple and complex that cause each others conscious experiences."
Markets are by definition a vast network of conscious agents. Perhaps we should think of them as us talking to ourselves.
Slogan Contest!
THIS IS NOT INVESTMENT ADVICE
I am not a licensed investment professional. What follows are my personal opinions and thoughts which I will use to determine my own trades. You should always consult a licensed investment professional before putting your money at risk and you should never believe anything anyone says on the internet.