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A Fresh Perspective on Why Stock Market Continues to Defy News

Why a “disappointing” jobs report did not send stock prices lower

by Bob Stokes
Updated: December 08, 2020

Many market observers assume that the news is the main factor in governing the stock market's trend.

Yet, Elliott Wave International has shown time and again that there's simply no evidence to support this widespread assumption.

Consider the big economic news on Friday, Dec. 4 (Marketwatch):

'Job growth has seriously slowed'

The November jobs report on Friday showed the coronavirus-battered U.S. economy regained 245,000 jobs last month.... Economists polled by MarketWatch had expected a gain of 432,000 jobs...

As you might imagine, economists expressed widespread disappointment and said the "labor market is losing momentum."

According to the conventional wisdom that investors react to news, stocks should have ended the day lower.

Instead, the Dow Industrials hit a record-high on Dec. 4. The price closed 248 points higher.

Financial history is filled with instances when stocks rose on bad news and fell on good news. Also consider this illustration and commentary from Robert Prechter's 2017 book, The Socionomic Theory of Finance:

ExogenousCause

The chart is an idealized representation showing what would be the presumed effects on overall stock prices of a sudden slew of bad earnings reports, an unexpected terrorist attack..., a large "economic stimulus" program, a major contraction in GDP, a government program to bail out at-risk banks, a declaration of peace after a time of war and a significant decline in interest rates. Under this causal model, such events would--rationally and objectively--effect a change in overall stock prices. The problem is, this depiction does not match empirics. That is not how overall stock prices behave.

Actually, the stock market's chart pattern unfolds according to the Elliott wave model, which reflects the repetitive, hence predictable, changes in investor psychology.

The belief that news and events drive the market's long-term trend is a myth.

Get our latest Elliott wave insights into the stock market's trend by following the link below.

“2021 US Equity Outlook”

That's the title of one of the sections in our just-published December Elliott Wave Financial Forecast.

Here's a quote from that section:

Stock market valuation measures are not timing tools, but they can reveal when stocks are truly ripe for long-term positive returns.

Insights into past and recent stock market valuations follow that quote. These insights are eye-opening and reveal information that every stock market investor should know now.

Equally as compelling is the new Elliott Wave Financial Forecast's commentary on sentiment measures.

Prepare for what our analysis suggests is ahead for 2021 -- before it becomes obvious to the crowd.

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