Lately, we can feel the pressure on most tech companies, in particular, the Chinese tech firms. That has led to a decline of more than 25% from the peak of Feb 2021. This drop comes as no surprise because there were a series of “attacks” on the company by various news channels that suggests that their glory days are over. That said, what’s commonsensical in this situation as mentioned is potentially more telling than as well. That is why we are going to discuss in this week’s post how market movements are actually counterintuitive, meaning that we might be able to “predict” what is going to happen once the wave of bad press alleviates or switches target.

The market is often manipulated by overly-reactive market players (TRADERS)

The general trader’s mentality is always about short-term gains so that they switch capital for financial assets as quickly as possible while turning a profit for themselves. This means that they will likely sway along with the trends of the market more often than not, resulting in more elaborated swings in prices. While traders are being objective, they aren’t really bothered about the true fair value of the asset that they are buying and selling. Instead, they are just trying to keep their assets liquid and profit-generating which in turn causes the market to move in an illogical manner. That is why we should be mindful that whenever we see stock prices move too fast, it is probably due to traders joining the wave of buying and selling and waiting to hop to their next surfboard before the big wave on the other side comes.

The press amplifies the impacts of each news item to push prices higher or lower (News)

After following the news for years, I can’t help but notice that the news is just a source of pure sensationalism. By no fault of theirs of course but what they are have been doing is nothing but getting attention from their viewers with potentially market-moving information. This results in mindless price movements almost immediately. Most evidently, we have seen the US market climbing aggressively for every small piece of good news. All thanks to influential news channels like CNBC, social media, and Reddit, it is getting harder and harder to stay objective in the market, which is why there has been an increasing number of traders in the market since the pandemic hit in 2019.

Take note of the market reactions when the attention on it changes drastically for a period of time

So how can we spot windows of the market moving in the right direction? It’s simple, just observe the market or stock once the buzz died down and see how it rises or falls. These movements are usually in the opposite direction compared to previous trading sessions and their price movements are usually as fast as the recent rise or fall. To some investors, this is considered a rebound or short squeeze but the gist of the matter is that the recent price movements are simply unjustified.

Closing Thoughts

It was a little hard trying to pen down my thoughts for this post because, to be honest, it sounds like speculation. Yet, we cannot deny on multiple occasions that price moments, in general, do not make sense. Hopefully, this post can help question conventional thought about market movements and provide that little shock to reactive “investors” who are always tugged from side to side and making poor decisions.