The market behavior is so strange that it mostly go the “Wrong” direction as perceived by the public. And, that cause most public, (90%), continues to lose money in feeding the financial system.
Here are two simple terms which might be interested for some, in order to know a little more why would the market often goes the different direction with their researches.
1) Triple Witching
2) Window Dressing
In the derivative market, such as option and future, when one person is making some profits, some others got to lose the money to him.
Imagine that when the market is so bearish that everyone would believe that it would continue to go down… What most public will do is to buy the “PUT” Option, which it can use margin to leverage for high benefit from the market. So… Imagine that all the public is right; this would drive the option writers, mostly by financial institutions, to have big losses or even drive them to bankrupt with a few consecutive rounds of "strike" in the targeted price.
Now, imagine that you are the financial institution, what strategies or action you are going to take???
Of course, you would want to make sure you are the one who win, and that is the whole purpose for selling the option. You would then do whatever necessary possible to ensure that the option would not strike within the expiration date! (It is up to you to imagine what necessary action it might be…)
So this create pullback from the trending market and create waves…
What Does Triple Witching Mean?
An event that occurs when the contracts for stock index futures, stock index options and stock options all expire on the same day. Triple witching days happen four times a year on the third Friday of March, June, September and December.
The impact of "triple witching" has been associated with increases in the volatility of the market. The increased volatility increases the uncertainty about prices of the underlying stocks. This phenomenon is sometimes referred to as "freaky Friday".
And, if one would to examine the market behavior around these period, it can usually find serious pullback just before these dates.
What Does Window Dressing Mean?Performance reports and a list of the holdings in a mutual fund are usually sent to clients every quarter. To window dress, the fund manager will sell stocks with large losses and purchase high flying stocks near the end of the quarter. These securities are then reported as part of the fund's holdings.
Another variation of window dressing is investing in stocks that don't meet the style of the mutual fund. For example, a precious metals fund might invest in stocks that are in a hot sector at the time, disguising the fund's holdings, so clients really have no idea what they are paying for.
Window dressing may make a fund appear more attractive, and it can't hide poor performance for long. But, the trick is that most public do have faith with their fund managers, and hope that they are doing all the best to protect their interest as they paid the fund managers to do so... Well, things are getting more complicated in modern society, and HOPING is definitely not a good strategy...
"It is better to be out of the market for a week or
a month than to make one wrong trade.
Stay out and your judgement
-Richard D. Wyckoff