1. In the past 2 months, the market would rise until the middle of the previous month steadily with many consecutive up days until the middle of the month. Then it comes down stringing together down days until the first week of the next month. In the first week of the month, the market comes under heavy selling pressure until about the middle of the week, it then reverses and move up.
2. The KLCI (Malaysia) is considerably less volatile compared with Hang Seng Index and STI. Doing a delta of the returns between STI and KLCI, you can estimate the activity of hot money moving in and out of the market ...the KL stock market attract fewer hedge funds and short term money than ours. Yesterday the KLCI rose and the STI fell probably due to hedge funds forced to sell when the US$ carry trade was disrupted. The HSI fell a lot more.
I can't jump into conclusions with just a few observations but can make a few interesting guesses. I think there is a lot of mechanical trading or algorithmic trading going on the markets these days many short term traders use fixed rules to execute their trades. Perhaps these systems and rules come together and result in a some kind of pattern. Markets are supposed to be random - you shouldn't see so many consecutive down days or up days but I notice in this 7 monthrally such short runs are common. The talking heads on CNBC will attribute it to some change in economic fundamentals but I think they are the result of short term strategies and trading systems. Collectively, they will sell after the market moves up for 1.5-2 weeks, then buy after the market move down for 1.5-2 weeks.
I can really say for sure....but will we see the market start moving up for 1.5-2 weeks from today? In any case, I've been selling my stock in batches after mid October. ...even if the market moves up, it will probably turn down near the October peak.
Just my 2 cents worth. I'm not a professional. Take what I say with a pinch of salt.
Right this minute stock markets that are still open are seeing a sharp sell off.
Very interesting trading pattern has occurred for the DOW- it surged up 200 points last Thursday, fell 250 points on Friday then rose 76 points yesterday in the most volatile 3 day since last year's crisis. US stocks have fallen steadily for 2 weeks before this 3 day period. The VIX index which measures "fear in the market" is at a high for the year. The Dow futures which anticipates how the Dow trade tonight is sharply lower at -100points.