If selling was a mistake…Why is Nobody buying?

Last week the financial markets were all a buzz trying to explain why the stock market sold off in such an extreme manner. I have heard one commentator after another give this reason, that reason, but no true reason why. I’ll give you my take, ready? People were selling…No one was buying. I know, too simplistic right? That’s the problem most times, people want a different answers to what they perceive as complex questions. Sorry, even some of the most complex questions or problems can be answered with a simple answer. Why do you think the most powerful words in business have 3 letters or less? Remember these? Yes…No. Need I say more?

If the panic selling that took place last week was just a so-called “fat fingered event” (that’s Wall St. jargon for entered the order wrong.) Why wasn’t the pricing error of Good Stocks Cheap been completely retraced? Why was it only retraced by a little over 65%. I was listening to the financial channels all day after the sell off. One by one they commented on the breath-taking buy back the market was now engaged in. They were tripping over themselves to be the first one to recite the words…”Today we experienced one of the biggest up openings on record!”  Wow! I guess that settles it then, it was just a bad order entry. However, what should be nagging at your ear, and what you should be focusing on is why didn’t it go back to where it started? Why only back 65%.

That would be a good question, but maybe a little late. The question you need to be asking yourself now is, Why did the biggest 1 day higher opening get completely erased 4 days later? If the event was a mistake, why aren’t they buying at even a larger discount? Or to use an analogy… You had dollar bills mistakenly priced at 70 cents… People came and bought them en mass, but no one was willing to pay any more than 70 cents, and just 3 days later, no one will buy them for 65 cents. If it was a mistake, how can the price be going lower?

It’s because people feel that buying is a mistake, no matter how good someone else thinks the price is. Will it still be argued that the sell off was caused by someone incorrectly placing an order, even when no one will buy at the level they said was a mistake? And what will the correct response be then? I can hear them on the financial news now…“Welcome to the Financial News, leading our discussion is our top market experts!…In today’s markets the……..”.

I just love a good sit-com!

Mark

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