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Fort Collins, CO | Alright, here's the link to this week's Weekly Corn Market Update:
https://www.quartziteriskmanagement.com/weekly-corn-market-update/05...
And here's a quick note I wrote this morning about getting caught up in momentum markets:
The Siren Song of Momentum
When markets exhibit crazy momentum, it is hard to stay disciplined. It hardly matters if the market is going for you or against you. The siren's tune becomes increasingly difficult to ignore the longer, louder, and further she sings. However, it is usually best to stuff up your ears with beeswax and tighten the bonds on your inner Ulysses, no matter how much he begs to be set free. One can indeed make a great deal of money chasing momentum, but one can lose a great deal of money too.
I run a weekly poll on the company's Twitter page. It is hardly scientific, and I don't think anyone should trade based on the responses; I certainly don't. It gives respondents three price buckets for Dec corn futures, up, little-changed, or down, based on where our option model prices the likely probabilities of market movement for the following week. I have a few goals with the poll: promotion, engagement, and entertainment for the participants. The results often show a bullish bias. That makes sense; most people want the market to go up.
Last weekend's results were interesting. After a 12.9% up move in one week and a 36.4% rally since the most recent down-week six weeks prior, this is how the results came in. 72.7% of respondents said the market would be up a further 2.4% or more. 20.5% of respondents said the market would be little-changed in a range from down to 2.7% to up 2.4%. In comparison, only 6.8% of respondents voted that the market would be down at least 2.7%. That was a record level of bullishness since the poll started in November.
Markets are not like the sunrise. Every morning the sun rises in the east, as it presumably has forever. It has happened so many times that we take that fact entirely for granted. I doubt any of us wakes up in the morning and thinks, "There it is in the east again, one day closer to it rising in the west." With markets, it's different. Markets vary; it's what they do. They often overshoot in one direction, only to violently correct themselves in the other. Markets will go one way for so many days or weeks that it's easy to believe that is the only way they can go—the siren luring in the sailors and then dashing them upon the rocks.
It is hard to fight the siren song of momentum. It can keep us in positions far too long or squeeze us out of them at just the wrong time. In the end, if the goal is to manage risk and not to speculate, then silencing the noise is essential. Everyone loves to cheer for the hail-mary pass at the end of the game - it's exciting. Here's the thing, solid but boring fundamentals in the first 58-minutes usually prevails. Do you want your marketing plan's success to come down to one play at the end of the game?
As always, if you have any questions or feedback, I'd be happy to chat.
Thanks,
James | |
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The Siren Song of Momentum and the Weekly Corn Market Update
