An Up Day On Horrible News

Unemployment worse than expected, GM and Ford earnings far worse than expected. So what should happen... markets move up sharply... Go figure. But hey, you have to play the markets game by its rules. The problem is, the rules change constantly.

I read a lot of bewilderment and whining on message boards when days like Friday come around "The news is horrible, why are the markets going up?" Or when times are good "The news was fantastic, why are the markets going down?"

Simple, the markets had already taken into account whatever news had been released that morning. "Buy the rumor, sell the news" or in Friday's case "Sell the rumor, buy the news".

That's right, the markets had already anticipated worse than expected unemployment by dropping 900 points the previous two days. So when the number came in "as expected" and not any worse, it was a relief and the markets moved up.

I know, you can't keep score because you don't know the players. But that's why we don't day trade or trade in general for a living.

Yet people that try gripe and complain about it not making sense, it not being right, it not being fair. Well, you either play by the markets rules or you get out of the game. You can't fight it, you can't change it.

This is why the general consensus is to not try to time the market. You can't reason with unreasonable actions, therefore it's almost impossible to time things.

That's true on a daily basis, but when looking at the big picture I do believe you can time things. When things look like they've gone too far to the upside, get out. Once they've revalued to where they should be, get back in. Times like that aren't on a monthly basis, sometimes not even on a yearly basis. Bull runs last a few years, then they fall back and then they run again. Usually. We'll see what happens this time around.

Expect the makets to go up for a few days. A turnaround will come next Thursday or Friday. Hedge funds have to liquidate to meet their customer demands of cashing out by the end of the year. I think this could be interesting.

I really enjoy reading all of what I can find where technical analysts (chartists) explain what they're seeing with Elliott Waves in particular. I'm seeing powerful evidence that we may see a small rally early next week and then the bottom will fall out. Dow 7800. I'll be ready to play it if it materializes. If It does play out I'll move my retirement back in at that point for a 20% rally and then reassess.

Enjoy the weekend. Fall has arrived in Raleigh, the leaves are starting to pile up.

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An article I just read is below along with an excerpt from it:

Does this mean that the market has become impervious to positive divergences? No, at some point the pressure will become too much, and oversold/undervalued conditions will re-establish an equilibrium level. Such an event will be a retracement, and readjustment to parity, but more than likely ... not the end of the Bear Market. On the plus side, there will more than likely be at least two rallies that will last at least one month before this is over.

http://www.stocktiming.com/Friday-DailyMarketUpdate.htm