Today, on this last day before Adam returns, I wanted to pull back the Trader's Blog vale and show you a little behind the scenes action. I'll get to the great article by Douglas Newberry from The-Market-Toolbox.com, in a second, but first do you know how valuable you are to us? No really, you are our business and without you we have nothing.
Without your support of our site, without you visiting our guest bloggers sites, and without your comments we're dead in the water. So THANK YOU! Second, do you know how many sites, professional traders, and alike want to be guest bloggers?? Over 50 requests A DAY! We screen each one, check their background, and research like crazy just to make sure the content they present to you is great. It's a lot of work, but you are our customers and without you we'd be GM...HA!
Now to Douglas he's a great guy, I've known him forever and he and his partner for the longest time and I can attest to the quality of their site, knowledge, and desire to truly expand your trading knowledge. Please visit The-Market-Toolbox.com, comment below, and enjoy the article on news media and the financial markets...
=================================================================
There are many ways to pick stocks to trade and a whole lot more ways to “invest”.
There are some great strategies and indicators that are staples in any good trader’s arsenal and some have been around for decades…even longer.
Most people are looking at stock charts and reading financial statements and supposing how they think a particular stock or market will perform.
Most are looking at chart patterns and calculating odds, managing risk and designing an exit strategy and all of these are important steps in the process.
One way we find traders get “tripped up” is not looking at the open carefully enough. One of the most powerful ideas we have come across is the idea of looking at the market “from the open” as opposed to yesterday’s close.
There are many occasions where we see the market gap up at the open and trade lower for the rest of the day. Those who are not watching closely will be misled as the news all day will report that the market is up and then toss out the current quote.
The problem with this is that they are comparing the current quote with yesterday’s close.
It’s like living in “The Matrix”.
Would it not be a more accurate report to say the market has dropped from the open and then lay out a figure?
Surely it would give investors or those concerned with the markets action a better idea of what is happening today.
Ideally every mention of the market conditions on the news would include both lines of text and give a very clear picture of what is going on in the market today.
Something like this would be great.
“The Dow Jones added a quick 150 points as the market gapped up this morning and has since given back more than 130 points sitting right now at (insert current quote here).
Investors are (mood) about (headline) and expecting (more information to come).
End fake news copy here…
How the market opens and trades after the open is a lot more important than where it closed yesterday and the financial news media are all using the same “scheme” to feed the public market results.
For instance, in the above scenario you could surf all over the financial Internet and see green arrows and positive headlines. The talking heads on CNBC would all have their happy faces on and talk about how the market is up based on some news item.
But, is the market really up?
I suppose that would be open for debate. But there is no mistake that anyone looking to trade today is seeing a market that is giving up 130 points even while all the happy chat goes on.
Moms and Pops driving around in their new downsized SUVs will hear NPR say the Dow is up 20 as they listen without any indication that we have already dropped 130 points for the day.
The thing about this that bothers me is that it is misleading and seems “managed”.
I am sure that each one of you can remember a day when the futures were up and the market gaps up big and everyone gets excited and thinks we are have a “good day” in the market only to watch it all evaporate and close even or down for the day.
The same thing happens in reverse as well. The market gaps down, and trades higher all day and the “news” will be equally misleading all day.
There are other things that make me concerned about the way the media presents the market to the public and we are trading now in a market that is more “news driven” than at any time I can remember.
It makes you wonder why the markets keep trading higher in the face of some of the worst headlines any of us can remember.
Wars, deficits, debts, bailouts, bankruptcies, terrorism and now we get a pandemic just to round things out and yet a defiant market pushes higher.
Now would be a great time to be really careful with your trading. The market has come a long way and bear markets can have many rallies before we see the real bottom.
It is important to be aware of the news that can drive the market, but you really need to watch how the news is delivered and the agenda of the sources.
Take a fresh look, you might be surprised what you find.
Matrix indeed.
Douglas Newberry
Please visit The-Market-Toolbox.com for some quality material!
I have never liked “news markets.” By this I mean the skittish price actions and reversals. Not steady-as-she goes! The definition of a solid bull (and bear) markets seem to be a staircase, one step at a time, upwards, (or downwards), disregarding significant news of the day, proceeding in the same direction – regardless!
Then add CNBC and others into the mix, while “back-in two-minutes” in order to sell “tooth paste.” (And when Radigan asks an honest question, he got fired: his contract was not renewed. He was referring to the two denying polititians.) And Maria is just as bad. A couple of years ago, (more in her prime time), in the midst of a strong downdraft market she asked the interviewee “what would you buy now?” Not what should be “sold” or “held” then. (All designed to get a listener to place money into the market – never to remove it. Don’t ask or communicate the wrong questions on the air or lose your job!)
Do your own research after any “tips” you come upon and make your own decisions. (Then you know who to blame.) This raises the specter of where good data and good analysis can be obtained. All things count! Add to that the range from options/shorts to the long term approach, and you have a big handful. And if we digress into the word “honesty” well, be warned. Making $$$ today is not easy. Me? I continually “shop around” as time permits, and take most information with a grain of salt. Those wild, outlandish and colorful advertisements do not sway me for a minute.
Now, for a rare comment, should the reader wish to look at mine at all: Sure I have views, but I am a layman at this, just like you. I have evolved some conclusions, but not advice of any sort.
Many experts and others still call this a strong bounce in a bear market. Yet one reader (above comment by Tom) notes the conflict definition of a steady bull market, vs. all the bad news to the contrary. Back in the 1929 depression, the government officials froze up the financial system, such as it was in the Spring of that year, and the big crash followed that fall. Was it the cause? The European banks did the same things anyway.
Today, we have the seemingly opposite actions by the officials everywhere, plus a “world” market followed around the clock. Instead, now we are dumping tons of (trillions) dollars into the fray, trying all sorts of approaches. Back in the depression time, FDR closed the banks, but he did not remove bank officials nor tell bond holders any terms, etc. (If Putin had fired a bank or car executive outright, or specified financial terms or degree of bankruptcy involved, what do you think our shrill media would call it?) In this country only some republicans are commenting, without audience belief so far, and silence from CNN on the words to use.
But I suggest a new thought: money pouring into a sieve, with the level still rising. That money can affect the available cash to float a higher stock market level, temporarily. But watch out when the additional money dries up, turns things into inflation characteristics, and counter (interest rate) moves apply. What might happen to the stock market, then. And how long can we print money to solve the immediate situation. And the added money goes through the sieve! I leave you there. I don’t have a clue!
This observer notes that, while there seems to no real legs yet for a US secular bull market, such as what happened during the Reagan era, there are these two nations known as India and China, respectively. It is they who were driving a lot of the stock market boom before the October crash. It is they who have added some 2.5 billion people (in comparison to our 300 million) to world demand for goods and services. It is they who also happen to have a lot of cash to again drive price increases. That addition to demand is one very good reason why I am again reminded that, even in a bear market, there will always be bull stocks. Some of this current rally is a lot of sideline money all dressed up and no place to go. But some of it that addresses the aforementioned needs of India and China is a reflection of actual demand.
I somewhat agree with jon livesay in knowing it is impossible to read and understand the "Public At Large Minds"; however, it should be one of many pieces of information that goes into determining the risks and trends of any give market or business decision process.
I am not a seasoned trader, more of a novice in fact; however, I tend to evalute my stock purchase and sell points based more on technical analysis that portray the possible/potential trends. In my evaluations I worry about the opening price, how the opening price might move based on the strengths of the technical signals of how the trends of the stock has been operating during the preceeding 30 days and sometimes how it has behaved in the past 5 days and even the day before on increments of the hours within the day, e.g. 5, 10 15 minutes. In adddition I follow the trends taking place throughout the day and watch for early trend signals that the money will flow outward (read that Profit Takers from the day traders). I haven't been 100 percent accurate in either the buy or the sell of stocks, but I find such information more comprehensive and reliable than reading the company's balance sheets, etc.
Of recent months, say starting in mid to late January 2009, the trends were clearly exhibited that the bottom of this depression had been reached and certainly by late February the trends were very clear (at least to me) that the trends would be going upward. Thus far my theories haven't been proven wrong.
I closing, investing is something that each person must find systems that they are comfortable with and to act accordingly.
Boz
I agree totally. I honestly feel that the market is way overdue for a very big pullback. All the "talking heads" on CNBC have been pumping this market 24/7 for almost 2 months now and with all the bad news it just continues to go higher and higher. What happened to the "worse financial crisis since the Great Depression"? During the depression there were several rallies and pullbacks (but they didn't have CNBC then). I don't think this is good, I think we should have had a pullback by now and the longer it waits the harder the fall is going to be. I started shorting the market several weeks ago and I have been punished because of it. It will correct and pullback, its not a matter of if but rather when. Lets hope that they don't pump this thing so far up that when it does it doesn't hit a new low.
"Investors are (mood) about (headline) and expecting (more information to come)."
Pardon me. but are you actually recommending this kind of nonsense? This kind of thing is exactly why I no longer take any notice of newspaper comments about the market. Reporters who report a small rise or fall in the market, and then confidently announce that it was due to "investor optimism" or "investor worries" are simply idiotic IMHO.
No-one can read minds, least of all on a grand scale. No-one can tell you what "investors" think. All you can ever do is look at the price action, and maybe apply some technical indicators. But anyone who says they can tell you the "mood" of investors - unless it's the day after a market crash - is simply blowing smoke.
i have been screening for stocks above yesterday's close and within 99% of the current day's high. given your advice, i will now add a screen for stocks trending up from the open. thanks. hank
When you get right down to it,trade as if "There is no spoon"