Okay ladies and gentlemen, it's pop quiz time. Stocks declined today (Monday) because:
1. Regional manufacturing data dented optimism about the economy's health.
2. The Lakers won the NBA Championship.
3. The dollar rallied and another weekend of 'too far too fast' stories.
4. Voters in Iran are really, really pissed off.
5. The market does not go up every day.
6. Falling oil prices, geopolitical worries and a weak economic report.
7. Even more insanity than normal was on exhibit in the New York state legislature.
8. Investors ran short of reasons to keep the market's rally going.
Which reason is correct? The answer is, It Depends -- on which of the reasons you accept from among the several news stories I quote above (except for 2, 4, and 7, which were also real stories, though no one cited them as the "reason" the market was down).
You may or may not find this list amusing, but please understand that my wit (or lack of same) is not the issue. The simple point is: News does not drive stock market trends. ALL of the stories above had the SAME "influence" on today's market, namely NONE.
We take the market seriously. We know that it tells it own story, completely apart from the headlines. If anything, stock trends anticipate news trends -- not the other way around.
As for how the market tells its own story, it does so by unfolding in recognizable patterns: recognize the pattern, and you can often anticipate what's next in the story. For example:
"The main stock indexes made new recovery highs yesterday, in line with Wednesday’s forecast. The rise shows signs of exhaustion, with the potential for a more protracted decline increasing by the hour."
That's the lead sentence from the
Short Term Update just this past Friday, June 12. For more about what's next in the story,
click here.