Let’s keep it simple today. Okay, so I always keep it simple, but there is a reason for that. It is simple, at least in my mind. The market moves up and down in the near term on economic data, news, rumor (sometimes the same as news), and perception.

Now, if all is right with the world and the market system operates on its own energy, in the longer term, it is the trend that powers the movement. Earnings power the long-term trend, the global economy powers earnings, and the US economy powers the global economy.

Here is where it gets really simple. If earnings are trending up, the market is trending up. If earnings are trending down, the market is trending down.     

  • U.S. stock futures are trading higher in concert with a sharp rise in Asian stock markets on strong industrial production data from China.

The market moves up and down on the data and the news and the above is both of these. Thus, the news that China’s economic data is strong moves the market, in the absence of rumor that is. The perception (today) is that China will keep on growing at a 7% rate or so. Ergo, we have a positive market today.

  • New orders for capital goods by U.S. businesses recorded their biggest drop in eight months in September (1.7%).

Two things happened to keep the above from bringing the market down. The first is that China’s industrial production is more important than the new orders reading, at least that is the perception today. Second …

  • In a sign of strength in the manufacturing sector, unfilled orders of core capital goods increased 0.6 percent in September.

Now that the market has rebalanced, taken the wind out of the overfilled sails, it is ready to consider the fundamentals, which is what we can expect for now, at least until the Fed chimes in with its thinking about rates, the geopolitics of the world explode, or the breathless media latches onto a new, negative bone about the latest thing that will bring the market and/or the global economy down.

See, I told you it was simple.

  • Later Friday, Halloween, a cold front moves over the area and it looks to produce rain in the evening.

P.S. The above is scary for us here in Central California, as we have not had rain for some 185 days. What will happen? Will I get wet?

Trade in the day; invest in your life …

Trader Ed