Yesterday, my friend Miggie said to me, “You seem to always write about the general market anymore.” I thought for a moment about the implied question: “Why?”

In that moment, I came up with several reasons for why I focus on general market commentary, which I told her, but in my mini litany of reasons, I heard my words about you, the reader.

Writers write to an audience, but writers are not always afforded the luxury of knowing who our audience is exactly, so we assume. In my case, I write for TraderPlanet, a website dedicated to educating traders and investors, traders and investors of all stripes – brand new to advanced, stocks only to options-plus. When I look around the site, I see all kinds of quality educational material geared to all levels, but what I don’t see is a daily commentary that speaks to a fundamental of the market for me – keep it simple.

In my job, I see a whole lot of unnecessary complexity about the market. In fact, there is a rather large, market-industrial complex that has arisen around the market and the whole focus of that cabal is to keep the celebrity analysts and the talking heads at the top of the information chain.

Given this, I write to beginning traders and investors on TraderPlanet who deserve a simple way to see the market. Ergo, a continuing focus of mine is to keep reminding my readers to “Step away from the talking heads. I repeat, step away from the talking heads.” If you are learning this game, you have three important lessons to learn.

1)     The market ultimately comes down to fundamentals – economic data and corporate earnings.

2)     The folks in the market-industrial complex over complicate the market.

3)     Just because someone with financial credentials is saying something about the market, it does not make it so.

In this light, here is my commentary for today …

The last big hurrah for summer is here. Once this weekend passes, we are back into the school swing with the kids, back to the routine of work days for the parents, and back to a market backed by volume. The US consumer is also back to spending.

  • Consumer spending in the U.S. unexpectedly dropped in July for the first time in six months.

No worries, mate, this metric fluctuates, as do all the others. Always keep the overall trend in sight. As well, keep it simple. There is a whole industry of folks out there who make money keeping things complicated.    

  • When we take the long-term chart of the Dow … we see that it’s trading in a multiyear trading range, hitting up on resistance. … What makes this so important is you can see that the entire bull market trend over the past five years has started to reverse.

See what I mean? Pick some numbers, draw some lines, and, presto, you have a picture. It is like the Rorschach psychological tests. “What do you see when I hold up this card?” Well, here are two dire visions two analysts see in the splatter of dots.

  • A jolt to international confidence in central banks will lead to a 30 to 60 percent market decline, said David Tice, president of Tice Capital and founder of the Prudent Bear Fund.
  • The Fed’s low interest rates could bring a “scary” 50-60 percent market correction, said technical analyst Abigail Doolittle.

And there you have it, two perfect examples of what to avoid when playing this game. Along with the talking heads and celebrity analysts, there are the hill-top screamers. Sometimes, they are all one in the same.

As to the bull market trends starting to reverse … How can anyone say that with a straight face? Unless the US economy makes a U-turn in its positive trend, the market will do what the market has been doing for the last five years into the near future – trend up with an occasional “scary” correction and periodically rebalance with smaller downturns. In the end, the market will track earnings and earnings will track the US economy. Now, that is about as simple as it gets.

Trade in the day; invest in your life …

Trader Ed