Making the Market

Shorts got burned in the rally since March '09 because the gamma risk to business interests of government intervention was fully expected to be high.

Instead of intervening in financial markets, most of the focus has been on the health care sector. Market makers (who are now the focus of gamma risk) were clear to "make" the market. Big financial entities have been trying to sucker investors in since March '09 with bullish trends despite bad fundamentals and a high gamma-risk probability indicator all-be-it not really priced in till now.

Now that the gamma is indicating higher probable risk to earnings along with the alpha risk of a systemic declining rate of profit as valuations become more fundamental, the time is nigh for recovery.

Too much money has been consolidated over the past ten years for the declining rate of profit and the gamma-risk variable to present significant resistance. The recent spike in the gamma, having been accumulated beyond a reasonable support, found the resistance level.

The shorts failed to properly track the gamma-risk indicator. One of the values in that indicator is, for example, the level of failed expectations which has been trending higher for at least ten months. It is a short sell indicator in this kind of short-wave deflationary phase of the cycle.

Accumulation and concentration of capital over the past ten years is still more than capable of making market trends and sudden reversals that confound the indicators and render strange inversions. The gamma-risk indicator, however, as the name suggests, is much more resolved and difficult to manage. It does not rely on options and futures strategies that effect, or "make," the market. It is not likely to be bought or sold in a sudden reversal and it is in a highly visible public domain.

The gamma can be as much a causal factor as the concentration of the capital, so it is a reliable indicator of future trends and valuations both short and long. It can, and will, determine who "makes" the market which is the larger determinant of what valuations, and the timing, will be.