Emotional Markets Are Scary Ones

Today I have just been a bit of a witness to the market rather than a participant. After such huge moves it can be very easy to jump in blindly, and I must admit it was very tempting to short Bitcoin again, but the markets are an emotional mess right now.

It’s almost like when your favourite football team is 2-1 up in the last 10 minutes, only to concede making the game 3-2. 

At first elation, then nervousness, then just overall disappointment.

This was the market today, if we had two teams one named Bullish FC and the other Bearish FC this is how it would have played out.

In the Asia trading session markets were skewed heavily bearish, this was clearly Bearish FC scoring 2 early goals. 

As the European session came around, Bullish FC began to find their feet. Some sleek passing between the lines caused some problems for Bearish FC leading them to concede. 

The momentum really shifted in the U.S session, largely due to some false news which gave Bullish FC the opportunity to equalise, only for the goalkeeper from Bearish FC making an outlandish goal line save, which saw the momentum switch back to the side in the lead.

The game finishes 2-1, Bearish FC takes the win, but the game ebbed and flowed as momentum swung between the sides. 

How will they finish when the two teams meet again?...tomorrow. 

The momentum swing in the middle of the day was something to behold. It really highlighted how sensitive the market is right now. 

This was the moment things changed.

A tweet sent from an account known as ‘Walter Bloomberg’ stated that Kevin Hasset, the current director of the National Economic Council of the United States, said that the President Donald Trump was considering a 90-day pause in tariffs for all countries except China. 

Presumably the story came from a CNBC live interview and it led to some interesting price action.

Risk assets surged on the news:

• Bitcoin rallied 6.60%.

• S&P500 rallied 8%.

• AUDJPY rallied by 1.90%.

• VIX down 27%.

A news story like this gave us an insight into the market's thought process for now. 

Rally on any news that Trump turns back the tariffs. 

That’s it. 

The problem with this, is Donald Trump the kind of man to announce a significant day such as ‘Liberation Day’ just to rewind it a week later? 

I’m not so sure. 

I think if that is the tactic to go long, it’s a dangerous one for me. 

I for one am not going to get pulled into trying to call the low in the market, I’d rather wait for the market narrative to shift and to trade the opportunities when the time comes. 

The same account then tweeted this an hour later. (the times differ because I couldn’t find the original tweet, they may have deleted it). 

After the market confirmed that the news was in fact ‘fake news’ we saw some bearish sentiment continue. 

Again, highlighting to me how sensitive this market is right now. And it makes sense really considering the volumes in the market right now.

Just to give it a little context volatility in the S&P500 index alone had shot up significantly, and it these environments it can take a little to move a lot. An analogy I like to use is the see saw effect. 

As volatility rises, volumes fade. Think about the difference between volatility and volume. Trading volume represents the amount of contracts traded for specific assets, whereas volatility represents the fluctuation of price. 

We know price has been fluctuating a fair bit, but it doesn’t necessarily mean there is more buying and selling going on. 

To add to this battle between volatility and volume, President Trump continued to double down on the tariff announcements by posting on Truth Social:

It looks like the trade war between the United States and China has only just begun. 

Retail Traders Must Remain Nimble

I always say that retail traders may have less money, but they also have the flexibility to jump in and out of positions quickly. 

In these conditions this is especially true. Be nimble, be safe, risk less and survive another day. 

That being said, has anything changes? Do we have new information apart from prices falling, to really change the opinion of the market?

Not really. Although prices have dropped and lots of markets are considered ‘discounted’ we have to be careful that the market doesn’t drop a further 20%. 

Also, let’s look at the bigger picture. When you take a look at the monthly charts, we are still in very bullish trends. 

Looking at the S&P500 if the market trades through multiple support levels, and below the $4000.00 level, then I think their is bigger problems to discuss. 

But hey, remember what we can manage. RISK! 

In times like these, it can be about greed and opportunity, but I will tell you for a fact that most institutional investors and traders working with millions would have lowered their risk.