STA Blog

The teenage girlfriend two-timed you; your friends will tell you soon enough. Your lover ghosted you; it could take a while to get to grips with what’s going on. You were blackballed by your club or cancelled by your gang; it’s obvious. None of these are welcome situations, but what if lousy financial investments were as clear as these social situations in telling you that you’ve backed the wrong horse?

Palladium

The stockbroker who recommended the trade in the first place is unlikely to be uncertain about what to do next; think phrases like ‘buy the dip’. The psychological angst when crystallising losses may well prevail. Loss of face among the trading community can be a big motivator. The charts and technical analysis of these may be clearer and more immediate source of reliable information.

I bring this up this week because March 2022, and to a lesser extent February, have seen some markets suffer a very serious knock-back following extreme market moves. The combination of these two is more important than a move in any one direction. At extremes, technical analysts will watch for

Facebook

a series of warning signs. High historical and implied volatility – and good volume too. Oscillators at extremes or even signs of complacency. Media hype and consensus opinion clustering around narrow parameters and forecasts. Above all, the idea that it must happen because everyone says it will. Caveat emptor.

One of the biggest falls, in a very short time, that I have witnessed in my 40 years of trading was Moscow’s MOEX index, down 56% since January’s high (not the all-time high at 4078 in October 2021). The latest news is that the exchange will be closed until at least March 18th. This is not an emerging market or Ukraine-linked phenomenon; Facebook (now Meta) is off $199 from

Schatz

September 2021’s record high, to just $185 this week, retracing over half of its rally since 2012 – ten years’ work of this tech titan unravelled in a few months.

Other moves may be dramatic but not quite as clear. Moves in crude oil, which at the time of writing is forming a potential very large spike high on the monthly chart. Spot palladium has suffered from extreme volatility for many months and the picture hasn’t let up yet. The yield on 2-year German Schatz paper has had two consecutive months of swings way beyond 2-standard deviations – suggesting a market in disarray. As for London Metal Exchange nickel forwards, let’s not even go there.