There have been several articles written of late that explore the highly correlated markets around the world. If you have not noticed, more often than not, when the U.S. market moves lower for the day, major European markets follow along.
Then, in the evening, Asia moves higher/lower and we see pre-market futures move higher/lower and Europe moves forward/back until there is news to alter the course then most equity markets follow.
This is massive HERD mentality and can be both beneficial and problematic to both traders and investors.
How can anyone invest with confidence (long or short) when the daily variations that defy logic and are based on systematic emotional breakdowns/ups as well as the well known robo-traders.
Just when it appears that all is looking up, a comment from the EU can sway a continent as can the price of oil, retail sales, GDP, government initiatives, bank presidents, military actions, pirates, earnings, employment, CNBC guests, Bloomberg reports, WSJ conjecture, technical support/resistance, candle patterns, China stimulus, Swine Flu, Consumer Confidence….and the list goes on and on and on.
It is a daily barrage of global data that has got to be the greatest propaganda machine seen since World War 2. Perhaps governments are taking a similar stance as they beleive that the only way to keep spirits and confidence up ( which seems to bring out the spending for cash/credit strapped consumers)
Is it working? Yes and No. Simply, it will work in the short term until green shoots are either confirmed or denied. It will work as long as there is hope, but will die with higher taxes, higher unemployment and higher deficits. It will continue to shape the ideas and ideals of the masses as long as they have a media that is desirous of promoting a similar agenda with highly biased outlooks, clouded judgments and 401k plans they are desperate to revive.
It will work as long as the actual reports confirm the ideas presented. It will fail miserably if it is found out that it was all a big mind-game. That we hope is not the case.
|“||Wiki: Propaganda is the deliberate, systematic attempt to shape perceptions, manipulate cognitions, and direct behavior to achieve a response that furthers the desired intent of the propagandist.||”|
“Propaganda is neutrally defined as a systematic form of purposeful persuasion that attempts to influence the emotions, attitudes, opinions, and actions of specified target audiences for ideological, political or commercial purposes through the controlled transmission of one-sided messages (which may or may not be factual) via mass and direct media channels. A propaganda organization employs propagandists who engage in propagandism—the applied creation and distribution of such forms of persuasion.”—Richard Alan Nelson, A Chronology and Glossary of Propaganda in the United States, 1996
Chart of World Markets (US and ADR issues) for 6/30/09 – Click to enlarge)