Market Mood Swings And How To Benefit From Them

You must have heard many news like – market dropped due to some political upheaval in the middle east or the market soared due to some referendum in Europe. In the age of globalisation, all the markets and businesses across the world are intertwined, hence any geopolitical event has the potential to move the global markets.But where does that leave the investors? What should be their ideal approach to counter such uncertain situations? The good news is – whether markets fall or rise, it’s an opportunity for the investors. Here’s how.Investors In The Market CycleThe reason we say that whether market falls or rises, it’s always an opportunity for the investor is because if the market falls, all the stocks on your watch-list, most likely, will be in the buying range. And when the market rises, it’s a perfect point for you to sell the stocks which have reached their target price.The key point is – if you have a long-term perspective in stock investment, it will be your armour against all the uncertainties of the stock market.Let’s take a look at the market phases which comprises the market cycle.The Bear MarketThe bear market is a market condition where the prices of the securities fall considerably and the market goes through a significant downturn. In such situations there is widespread pessimism about stock prices and a lot of panic selling takes place which further escalates the downturn.Though it’s a nature of the market to swing up and down, intraday traders and short-term investors, who deal in huge quantities, have no other option but to sell their holdings to minimise their losses.However, long-term investors have an advantage in this phase, as they can choose to hold their stocks while they also have an alternative to average their existing stocks and buy new stocks. Always remember, the bear market is a perfect opportunity to enter the market and build a robust portfolio.Market Accumulation Phase (Consolidation)This phase takes place after the markets have hit the bottom and some value investors think that the market situations is good to buy as the worst is over. Valuations of stocks are very attractive in this phase while the market sentiment is still bearish. Which makes it an ideal time to enter the market. In the accumulation phase, prices are flat, as the disillusioned sellers start selling while the wise investors pick it up at a healthy discount. Owing to such turn of events, market starts to pick up.To get through such phases, investors should just be patient and hold their stocks. Giving in to your impulse of selling stocks due to continuous consolidation will only bring you losses. It’s just a phase which passes sooner or later.The Bull MarketThe bull market simply means that the market is on its upward drift. The market index goes high and all the major stocks start soaring. This is the phase investors invest for. One thing investors should ensure while going through this phase is that it’s not a buying period, it’s the time to review your portfolio and sell stocks which have reached their target price. In a way, all the investment, and calculated risks you take while the market was down pays off when you reach this phase. If you make the right choices, you will be handsomely rewarded.

S&P 500 Rallies As U.S. Dollar Pulls Back Towards Weekly Lows

Key Insights
The strong pullback in the U.S. dollar provided significant support to stocks.
Treasury yields have pulled back after touching new highs, which served as an additional positive catalyst for S&P 500.
A move above 3730 will push S&P 500 towards the resistance level at 3760.
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Pfizer Rallies After Announcing A Huge Price Hike For Its COVID-19 Vaccines
S&P 500 is currently trying to settle above 3730 as traders’ appetite for risk is growing. The U.S. dollar has recently gained strong downside momentum as the BoJ intervened to stop the rally in USD/JPY. Weaker U.S. dollar is bullish for stocks as it increases profits of multinational companies and makes U.S. equities cheaper for foreign investors.

The leading oil services company Schlumberger is up by 9% after beating analyst estimates on both earnings and revenue. Schlumberger’s peers Baker Hughes and Halliburton have also enjoyed strong support today.

Vaccine makers Pfizer and Moderna gained strong upside momentum after Pfizer announced that it will raise the price of its coronavirus vaccine to $110 – $130 per shot.

Biggest losers today include Verizon and Twitter. Verizon is down by 5% despite beating analyst estimates on both earnings and revenue. Subscriber numbers missed estimates, and traders pushed the stock to multi-year lows.

Twitter stock moved towards the $50 level as the U.S. may conduct a security review of Musk’s purchase of the company.

From a big picture point of view, today’s rebound is broad, and most market segments are moving higher. Treasury yields have started to move lower after testing new highs, providing additional support to S&P 500. It looks that some traders are ready to bet that Fed will be less hawkish than previously expected.

S&P 500 Tests Resistance At 3730

S&P 500 has recently managed to get above the 20 EMA and is trying to settle above the resistance at 3730. RSI is in the moderate territory, and there is plenty of room to gain additional upside momentum in case the right catalysts emerge.

If S&P 500 manages to settle above 3730, it will head towards the next resistance level at 3760. A successful test of this level will push S&P 500 towards the next resistance at October highs at 3805. The 50 EMA is located in the nearby, so S&P 500 will likely face strong resistance above the 3800 level.

On the support side, the previous resistance at 3700 will likely serve as the first support level for S&P 500. In case S&P 500 declines below this level, it will move towards the next support level at 3675. A move below 3675 will push S&P 500 towards the support at 3640.

Why Stoicism Is the Best Mental Operating System for Individuals in High Finance

IntroductionThe fabric and culture of today’s modern age and even more so in western society has provided a perfect environment for the re-emergence of an ancient Greek Philosophy, the philosophy of stoicism. Stoicism is a school of Hellenistic philosophy founded by Zeno of Citium in Athens in the early 3rd century BC. It was heavily influenced by certain teachings of Socrates. Roman Emperor Marcus Aurelius, born nearly two millennia ago is perhaps the best-known Stoic leader in history and also holds claims to one of the most famous and unintentional works of stoic literature, ‘the meditations’, his personal journal. In this article I will discuss different stoic exercises and explain how these can be applied to the minds and actions of successful actors within financial markets and institutions.Your new mental operating systemTrain Your Perception to Avoid Good and BadOnce you understand that there is no such thing as obstacles, only opportunities then you have truly mastered your perception.
During the 2007 financial crisis people truly thought a financial apocalypse was inbound however if you have ever seen the hit movie ‘The Big Short’ then you get a perfect example of people who saw disaster coming but instead turned this into an opportunity; by betting against the housing market.
As the Roman Emperor Marcus Aurelius puts it – “The impediment to action advances action. What stands in the way becomes the way”. Ensure you see obstacles as opportunities and understand good and bad are only part of perception; something that is ultimately under your control.Everything is EphemeralRemember your possessions and achievements are only lasting for a markedly brief time in the grand scheme of things. In the grand scheme of things, you are small, everything is. See yourself as part of the bigger system and do what is right here and now.
For professionals working within high finance it is easy to become consumed by the ego and focus on only enriching ones-self, thereby creating a moral hazard. However, if you see yourself as just a cog in an aggregate financial system which is in turn a part of a macroeconomy; then you see the role you play is ultimately, small. In order to benefit the system as a whole you must work with it not against it.Take a Birdseye ViewThis takes a powerful imagination but by doing this exercise you are able to train your mind’s eye to see your life in third person, you can then reflect on your actions and behaviour and also that of others. You can reflect on how others may have felt and what they did after interacting with you.
You also see yourself from a higher perspective which relates to the point I made about how small we are.
And finally, you can compare yourself to someone in a far worse situation, the reason for this is that there is always someone in a worse situation than you. Compare yourself to these people in times of discomfort and struggle and you may find some comfort in the fact that in a relative sense, things aren’t so bad for you.
If you work or reside within a skyscraper or high-rise building, take a real view from above. Combined with this exercise it should help to greatly expand your awareness. Conversely, if not you could always use Google earth live but hopefully in the future we will have services like virgin galactic at an affordable price, so people can get the truly pure experience that astronauts get.
For individuals working at Bloomberg or stock exchanges this exercise could be used for example, if a tsunami hits the coast of a certain region. Use the view from above to assess who and what is affected and follow the trail right back to the stock market and make decisions accordingly.”Is This Within My Control”Learn to differentiate between what’s directly under your control, what you have influence over and what is not under your control. Differentiate what you can change and what you can’t.
Do not waste time trying (and failing) to move immovable objects. Use your precious time productively on things that you do have control over.
Return to this question frequently or when a dilemma emerges, make a note of things that are in your control and things that are not. This way not only will you feel better, but you position yourself with a distinct advantage over people who fail to realise when a battle is unwinnable.
For example, if your employees are snowed in and cannot make it into work, do not be mad as you have no control over the weather.
You also have no control over huge market trends. A very good example of a huge failure to realise what was and what wasn’t under one’s control was the bank of England, who failed to realise they couldn’t beat the market on black Wednesday (Sept.16, 1992); when the pound was pegged to the European Exchange Rate Mechanism. Speculators broke the bank and they were forced to pull from the ERM.Contemplation of The Ideal Man (Or Woman)Humans were not born to be lazy. Ancient man was out hunting lions, fighting battles, saving women from barbarian tribes, the list goes on. But many modern men have been sucked into mediocrity by abundance, reduced to claiming benefits, binging video games and eating too much pizza.
No one can lead a fulfilling life living like this. Man must achieve his full potential. A man with a fulfilling life does the modern equivalent of ancient man. Focus on continuously improving and learning. Fight for success and dominate. Go out and get what you want.
Contemplating the archetypal ideal man is a catalyst for change towards becoming an ideal human being. This may be a never-ending quest however you should still think of the qualities that make up the ideal person and apply these to your life.
Good archetypal figures within finance to contemplate are figureheads like Warren Buffet and JP Morgan. You can also find good examples of archetypes by analysing movies like the Wolf of Wall Street or TV series such as Billions.Self-RetreatIn today’s ever connected world; wealthy and successful people have complete abundance of options of where their next holiday retreat will be. However, what most people fail to realise is that there is also infinite abundance within the mind’s eye, and self-reflection is a brilliant tool to understanding, and exploring your inner world, which is ultimately you on the deepest level. Peace of mind and freedom comes from within, regularly travel inside your mind for 5 to 10 minutes a day.The Stripping Method.Scenarios and situations have many different layers. Picture them like an onion where each layer represents a characteristic of the situation but not the core issue itself. Practice stripping away the unimportant layers to find the core issue.
This can be applied to economic analysis for example, the price of a share may rise or fall due to a company reporting higher or lower profit than predicted. This may be because they reduced their advertising spending or because they lowered the quality of their production materials, or outsourced labour. But ultimately the reason for a change in the price of a share regardless of any other speculation is supply and demand factors within the market for shares.Practice MisfortuneIt is easy to get comfortable in today’s world, but comfort can keep you in bondage if you are afraid that something or someone might take it away. Practice what you fear and make yourself familiar with the worst-case scenario. This will help you become grateful and prevent a relentless pursuit of material things, including money.JournalJournaling is possibly the most important part of stoicism and morning and evening meditation is an essential part of it. Benjamin Franklin set a great example of this and is daily schedule is available online, this would include setting goals in the morning and then reflection in the evening. In the evening write down what you did good, what you did bad, and what you could do to improve.
Managers can take a lot from this but in a financial context, day traders can also take a lot from this. For example, for someone who trades the news, they can note down all the reports that day that will move the markets, and at the end of that day note down what they did good and bad, and what they need to do differently next time.
Philosophy is something that should be written down day by day and how you exercise yourself and mind. Writing down everything you’ve done in a day allows for self-examination and is a form of mindfulness and reflection.Negative VisualizationThis stoic exercise prepares you for the setbacks in life. By visualising what could go wrong and what could be taken from us, we are better prepared for when negative events happen.
Todays finance industry is in the business of risk. So this exercise can be applied greatly in evaluating or making risk models, by understanding what can go wrong and helping to prevent a failure of imagination. Doing this exercise can also help you to realise what may need insuring, hedging or backing up (in the case of data).Amor Fati: Love Everything That HappensAmor Fati, Latin for Love fate is possibly the best mindset you can have in life. Throughout the centuries great leaders have followed this motto, which I believe to be a factor in their life’s successes. It is the best mindset for any situation you face.
Treat each moment, no matter how challenging, as something to be embraced and not avoided. To not only be OK with it, but love it and be better for it. Then you will have truly achieved greatness for yourself.
Financial setbacks will happen, but you must be better for it, and learn from it.Cultivating PhilanthropyPhilanthropy is defined as the desire to promote the welfare of others.
People in high finance may often be under the illusion that in order to become a philanthropist, you need money. But in fact, this is not true. Anyone can become a philanthropist. It just requires the right attitude towards other people.
The best exercise to practice is an exercise whereby you bring everyone a sphere closer to yourself. For example, your family becomes a part of yourself, your friends to family, and strangers to friends.
To apply this to individuals in finance, if you consider the financial system as a whole as a part of yourself, then you are working in the best interests of the system and therefore all the stakeholders effected by it. Using this ethical understanding you are culminating a sense of philanthropy.Training Your Physical Self-ControlThis is basically level 2 of negative visualisation. By practicing purposefully enduring physical hardship and going without things you crave/enjoy; you are preparing yourself for when you must actually endure a struggle. Whether it be losing something or enduring physical hardship. This also trains us to desire things not under our control.
For example, for people working in finance, try to treat everything as a loan. Instead of saying ‘I have lost it’ say ‘I have given it back’. Learn not to grasp too tightly to ephemeral things.
Start small by practicing going for a run in the rain and slowly build it up. Also try reading a poker psychology book. If you smoke, you could take it an extra step and try quitting.ConclusionIndividuals whether they be hedge fund managers, investment bankers or traders on the London stock exchange will all benefit from the use of stoic exercises, regardless of if they do decide, or decide not to educate themselves on the general philosophy of stoicism in the future.
The reason for this is because stoicism has emerged as an ideal way of life and mind for the real, modern world. Ultimately what Stoicism is, is a series of reminders, tips and aids for living a prosperously.
Be a better, happier person. Be stronger in the face of adversity. Turns obstacles into opportunities. Keep your ego manageable and in perspective. And finally take whatever help you can get but understand it must also come from within.Stoic on financiers.References:Wikipedia, last edited on 22 July 2018. Stoicism [Online] < https://en.wikipedia.org/wiki/Stoicism > [Accessed 22 July 2018]
The daily stoic, 2018. What Is Stoicism? A Definition & 9 Stoic Exercises To Get You Started [Online] < https://dailystoic.com/what-is-stoicism-a-definition-3-stoic-exercises-to-get-you-started/ > [Accessed 22 July 2018]
By Emanuele Faja, 22 February 2016. 10 Insanely Useful Stoic Exercises [Online] < http://observer.com/2016/02/ten-insanely-useful-stoic-exercises/ > [Accessed 22 July 2018]
Marcus Aurelius. Unknown, likely before 850BC, The Meditations. London: Penguin Classics
Epictetus, 1537, The Discourses of Epictetus. London: Penguin Classics