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Anyone who's been trading and investing for more than seven or eight years will tell you: Since the 2008 financial crisis, the market has taken on a different personality. Regular infusions of trillions of dollars in freshly created capital might change you, too.
All kidding aside, the U.S. Federal Reserve and other central banks have, with stimulus, changed the very heart of market dynamics.
Things ain't what they used to be. These days, the markets are driven almost exclusively by one dominant theme at a time.
This is the all-important market "narrative." Get to know it – really master it – and some of the biggest, fastest profits ever await…
I mention this because the market's current narrative of optimism could be changing before our very eyes, and it's so important to stay ahead of the curve…
Here's How You Make Sense of the Market
Let me show you the last few powerful narrative arcs the markets have followed since 2008. You should see a pattern form, and you'll see what I mean pretty quickly about how the markets have a "one-track mind" these days.
You'll probably remember some of these. A few of these arcs lasted years, others were short-lived at a few months or weeks or so, but all were very powerful, and if you were watching them, you were making plenty of profit.
January 2009 – June 2015: The Omnipotence of Central Banks
During this extended run, anything – and I mean anything – that meant more money would be injected by central banks made the markets happy. Anything that threatened the continuation of the monetary gravy train caused drops:
- The prevalence of "good economic news is bad" occurrences. Positive employment number? Stocks go down. Manufacturing falters? Stocks go up…
- European Central Bank President Mario Draghi's (in)famous "Whatever It Takes" speech in July, 2012, that sent global markets rocketing higher.
- The combination of Standard & Poors' downgrade of the United States' debt rating and the European sovereign debt crisis in August 2011 gave the markets a two-month window where it seemed like the central banks may not be in control. U.S. market drops 26%.
June – December 2015: "FANG Is the Thang"
In the last half of 2015, what was good for the so-called "FANG stocks" – Facebook Inc. (Nasdaq: FB), Amazon.com Inc. (Nasdaq: AMZN), Netflix Inc. (Nasdaq: NFLX), and Google (now Alphabet Inc. [Nasdaq: GOOGL]) – was good for the markets. These four tech giants were on a tear, pulling most of the market along for the ride, up and down:
About the Author
Nationally recognized technical trader. Background in engineering, system designs, and risk reduction. 26 years in the markets.