You know that quiet, slow feeling when you're getting to the top of the first hill of a roller coaster? It's the last few moments of quiet before things get exciting – and maybe a little scary.
There's a unique perspective I watch on the market that's telling me… we just had that moment.
Those of you that follow me know that I've been complaining about the fact that this market is missing the "risk on" trade. Those of you that aren't familiar with this concept will get it fairly simply with one of my "Ten Commandments of Trading".
Commandment IX states: "Stocks are driven higher by speculation, not fundamentals."
That's right; as much as we want to believe that fundamentals drive the market higher… they don't.
Speculation – the act of investing $1 because you expect to get back $1.01 or more – is what makes stocks go higher.
This bedrock truth is always on my mind, so I watch the small-cap Russell 2000 and how it's trading against the backdrop of the more widely watched S&P 500.
Here's what I see…
About the Author
Chris Johnson is a highly regarded equity and options analyst who has spent much of his nearly 30-year market career designing and interpreting complex models to help investment firms transform millions of data points into impressive gains for clients.
At heart Chris is a quant - like the "rocket scientists" of investing - with a specialty in applying advanced mathematics like stochastic calculus, linear algebra, differential equations, and statistics to Wall Street's data-rich environment.
He began building his proprietary models in 1998, analyzing about 2,000 records per day. Today, that database, which Chris designed and coded from scratch, analyzes a staggering 700,000 records per day. It's the secret behind his track record.
Chris holds degrees in finance, statistics, and accounting. He worked as a licensed broker for 11 years before taking on the role of Director of Quantitative Analysis at a big-name equity and options research firm for eight years. He recently served as Director of Research of a Cleveland-based investment firm responsible for hundreds of millions in AUM. He is also the Founder/CIO of ETF Advisory Research Partners since 2007, noted for its groundbreaking work in Behavioral Valuation systems. Their research is widely read by leaders in the RIA business.
Chris is ranked in the top 99.3% of financial bloggers and top 98.6% of overall experts by TipRanks, the track record registry of financial analysts dating back to January 2009.
He is a frequent commentator on financial markets for CNBC, Fox, Bloomberg TV, and CBS Radio and has been featured in Barron's, USA Today, Newsweek, and The Wall Street Journal, and numerous books.
Today, Chris is the editor of Night Trader and Strikepoint Trader and contributes to Money Morning as the Quant Analysis Specialist.