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If this chart doesn't scare the living crap out of you then.... ok, keep calm and put your money into the market as normal.   

The reason is that momentum trend is negative (red line on bottom graph is in negative territory) whilst short term momentum (blue line) is above red line (which means it must turn down again). When this happens it will be in line with momentum trend and we will see the big concurrent moves. At the moment, momentum trend is negative and short term momentum is positive i.e. crosscurrent. This is why we're seeing choppy market conditions, like the chop on the water when the wind blows the opposite direction to the swell. It just so happens that this imminent concurrent move will co-incide with the Fed's decision to raise / not raise interest rates next week. The market is so confused right now that it doesn't know what to do i.e. it goes sideways in a choppy way. So what happens when fear and confusion reign in the market...? People sell to preserve cash. And that creates more negative sentiment which feeds on itself in a vicious downwards spiral, especially when the algo traders and bots get involved.

Expect the market to sell off big time into next week's Fed announcement in a classic "sell the rumour, buy the fact" trade. Markets will recover after the Fed announcement no matter what the result but how much will have been lost before then? Going to be a very interesting week.... Of course I could be completely wrong about all this...   

I have no idea how to interpret that, but I think I'll just do as I always do, sit on the sidelines with my eyes closed and hope I come out the other end ok!

The last few months has felt like a continuous bloodbath. How much worse could it get?

A lot worse.

Anyway...I am still new to investing but if there is one thing I have learned....a market going down is only bad for those who don't keep a cool head. For those who do, on the other hand, it means you are about to buy shares at daylight robbery prices. All you need to do is make sure you found yourself a couple of companies with good fundamentals and enjoy the sale.

Could you not have at least let me enjoy my fikkin week end           

Markets ended just fine last week so your w/end should have been good. This quietness is like the calm before the storm.... I think by Tuesday we should have seen the market moving and volatility picking up before Thursday's big data release. If not, perhaps everything will be just fine, everyone will have had their valium and we all keep calm and keep buying....

Currently the market is quite volatile, but in my opinion this largely due to 2 entities financial press and economists. So many articles are written warning of a dooms day which is eminent, and the economists who should be reading tea leaves rather than trying their hand at projections. Then on the other side of the coin you have the statisticians who also like to colour their predictions. So who do you listen to - well hopefully all of them, but just don't be led by them or heed too much what they are saying after all they are doing this as a job whereas as for us who invest in the market to gain in capital growth and get the benefit of dividends over the years. I have been investing in the JSE since 1968 and have been through pretty much every major downturn that has occurred on the JSE and still today it is an appropriate market to invest in. I believe there are too many retail investors who think of the JSE as a roulette wheel, it isn't in fact it is far more even handed than the roulette wheel.
The market indices as presently reflected on my broker platform shows ALSI 49338 and Top 40 43834 these 2 indices where at these levels on or about May 2nd 2014 but per April 24th they both reached all time highs of 55,298 and 49,038 respectively. So they have had a  quite significant retracement which is healthy

So should you be nervous in this market - maybe, markets do gyrate over time so as an investor my view is that you need to sit these dips out. Those people who bought good quality shares in 2008/9 are probably all sitting with a gain of 40% on most of their holdings which means you can take a significant knock on your shareholding before becoming worried. So don't follow the herd and sell when there is noise in the market use it as a means of increasing your holdings in the performers   

Excellent post!

So far I'm completely wrong about this week being a bloodbath, although I have to say that my predictions are always at least 1 or 2 weeks too early....     Tomorrow is D-day so let's see what happens....

Hi gcr,

I'm not an active trader anymore as I have another day job which is far more interesting. I used to trade professionally as an Energy & Metals desk head for a major investment bank in London and Sandton. I would deal in futures and OTC options and forwards and also underwrite finance deals for clients (producers, traders, consumers etc.) that required hedging or structured finance.

I will punt on Oil and Copper futures every now and again. I do enjoy watching the Dow or SP500 indices though as it gives me a snapshot of what is going on in the world at any one time. I use my momentum analysis of the wind and the current to try and predict turning points on these indices and sometimes I also trade on them. However, I am often too early by a week or two as I forget how slowly stock markets take to react and that their natural bias is upwards, at least 80% of the time whereas the spot price of a commodity has no natural bias and is only a function of supply and demand at that time. What is important in commodity trading is the forward curve and whether it is in contango or backwardation. Compare this to storage costs and interest rates costs and you can get an idea of the mood of the market.

See http://www.trafigura.com/research/the-economics-of-commodity-trading-firms/ for a great white paper on commodity trading.

Back to the mood of the market..... It would seem with hindsight that the Fed's decision was 100% dialled into the market and hence no major price activity last week. But the mood has somewhat turned now. The Fed is now so scared of a Chinese and emerging markets crash that it probably won't raise interest rates this year at all. But the market is no longer acting on the crazy notion that bad news means "risk on" because rates will therefore stay lower for longer. Now the market is starting to get real and get worried that the world is actually in a pretty crap way still and that the lifeboats from the 2008 crash are still out there whilst the next recession is looming. The US economy and stock market can no longer rally on thin air (and the promise of cheap Fed money) and I think this has started worrying professional investors now. The nice thing about commodities is that they signal the state of global industrial health and for some time now they have been signalling that all is not well in the world. It would seem that herd and trend investors are starting to wake up to this fact, and that the Fed is actually now making things worse by keeping rates low because there are no returns anywhere to be had anymore. Value investors on the stock market have all packed up their bags and gone home now. It's only the "dumb money" and long term pension money keeping things going now.... As many have been saying for a while now, when someone screams fire, make sure you are one of the first to get out of the doors of the movie we have all been watching.

Ke Nako. It is (almost) time.... Momentum really looking like it wants to break down here....

Trying to be short equities is one of the most frustrating trades around. The market has an inbuilt desire to rally and it really looks like it has been supported these last few days, either by the Plunge Protection Team or the possibility of no-rate hikes this year. Which in itself is crazy i.e. the US thinks the global economy is too weak and therefore keeps rates down but equities rally. We really are living in la-la land these days. All of this reminds me of the madness before the dot-com boom where everyone convinced themselves that we were living in a "new normal" before the whole house of cards came crashing down. These artificially inflated markets also feel like a house of cards but hey, as long as they want to rally then it would be foolish to stand in their way....