After the elections, spy and CAC40

A Curiosity

Unexplained phenomenon are frequently observed during highly skewed (or expecations of) market moving events.

Monday was one of those days where the weekend expectations for turmoil in Europe, particularly France and Greece were highly anticipated. The market fell all day Friday with the assumption that Françoise Hollande would be elected president of France, which finally he was.

The strange thing happened on Monday. Here are two charts from Monday: the S&P and CAC40.

After the elections, spy and CAC40

The weak opening was expected, a socialist French president and neo-nazi Greeks on the front pages would be enough to spook any market, so all seemed normal. Strangly, the market climbed on both sides of the atlantic all day long, little by little it climbed and climbed. How could you explain this? Short covering all day? I really looked on, perplexed. There was no way I was going long, but it continued to climb. I sat out Monday. In fact I often sit out Mondays, and though I have no data to back up my argument, Monday’s are bad entry days for me, this was just another example.

I was feeling confident the EURUSD wouldn’t hold $1.30 and markets were in for some downside action. Here we are Wednesday and the downward trend has quickly taken over again. The CAC40 is rapidly aproaching 3000 again and the $SPY looks to open under 135. The $EUR.USD is now solidly under $1.30 at $1.2936. All of this is good for my trading but leaves me still unclear on Monday. What or why did the market behave this way? I’ve yet to hear an explanation. My thoughts at the time were that the markets like clarity and now that the elections were decided, the market might continue it’s oozing upward. It’s an unconvincing argument.

Good Trading.