The Dow ended the day up 330.44 points, or 1.38 percent, closing at 24,190.90. The S&P 500 rallied 1.49 percent to finish at 2,619.55, while the Nasdaq composite added 1.44 percent to close at 6,874.49. The index swung more than 1,000 points in volatile trading Friday.
The Dow and the S&P 500 both lost 5.2 percent on the week, while the Nasdaq shed 5.1 percent as rising interest rates spooked investors. The Dow average experienced two drops of more than 1,000 points and two gains of more than 300 points during this volatile week. At their lows this week, all three major indexes were in correction territory from the record highs reached in January…
Trouble with securities called exchange-traded notes that decline in value when volatility increases likely helped create more turmoil in the markets this week. The Cboe Volatility index (VIX) — the market’s best fear gauge — shot above 40 again Friday after jumping as high as 50 earlier in the week. At the end of January, the VIX was below 14.
Volatility is almost always present before a collapse. This is because the market drifts on a current of amygdala. It may blow one way, it may blow another, but the current of amygdala-triggerability is pulling it beneath that. If amygdalae are deadened to threat, they just about anything can happen, and the market will skyrocket. And if amygdalae are all easily triggered, any gains can be wiped out overnight, and you will have trouble getting people to take the risks of investing in the first place.
When I see volatility, I see two things. First are amygdalae that are responding to threat. Selling is an act of fear, and it is driven by amygdala. It also speaks to a diminished level of dopamine, which is keeping amygdalae online, and making them triggerable.
The second thing I see is a mechanism that will develop amygdalae to be triggered. So once you start the volatility process, that volatility is building up amygdalae to make them more triggerable, and that will produce even more volatility in the future. And all of it is laying the cognitive foundations for K in those who are involved.
If it is to stop, something has to happen to shut off amygdalae. Either the volatility comes to an end, there is a period of gains which produces dopamine and deadens amygdalae, or a constant stream of amygdala-triggers abates some, and allows stabilization to take hold.
But I do think it would be a fascinating area of study, to see how amygdala in unrelated areas, like politics and war, affect investing strategy due to bleed-over effects within the amygdalae of investors looking at what they want to do in the market. It would also be interesting to see if pleasurable, dopamine eliciting imagery like patriotic celebrations, pleasurable stimuli, and relaxing, amygdala-quieting stimuli could relax the increasingly antsy amygdalae, and bring the volatility to an end.
Then again, if the Deep State is trying to bring things down to negatively impact the Trump Presidency, there may not be much to do but ride out the storm.