My take on last night.Most of the big moves and whipsaws...

My take on last night.

Most of the big moves and whipsaws recently have resulted from events, such as FOMC speeches, cash rate changes, inflation figures, etc.. Usually, markets move generally in one direction until the next big news event. But last night's unusual turnaround seemed to defy logic . Actually it was all caused by the inflation news hitting two sets of investors differently. Just took a few hours to sort itself out.

My interpretation is that the inflation figures were already priced in as far as one set of investors were concerned. But caused a big drop, because the opposing set of investors had expected inflation to fall, so they threw in the towel, they sold and they shortsold. No fundamental reason for this, big mistake. Many previous shorters grabbed the chance to take profits thank you, and bulls waiting on the sidelines grabbed bargains thank you. The about-turn soon gathered momentum and turned into a short covering rally.

In other words, last night was an aberration of volatility, big swings overshot in both directions. I expect markets to generally trend sideways until the next big news event, with plenty of swings which will keep some day traders happy. Very difficult to predict.