Again, I would caution the market to take small bites and chew carefully before swallowing. Yesterday’s gulp chomped off another chunk of the big losses recently seen. Heck, the Dow is back above 17,000 and the S&P 500 crushed its most recent ceiling at 1967, finishing up 18 points higher at 1985.
My guess is the market will heed my advice today, even though the economic data coming out and the earnings coming out support an enthusiastic market. Looking at today’s action in the Russell 2000, the S&P 500 Mid-Cap, and the NASDAQ suggests the market is slightly tentative after yesterday’s big gains. As well, the VIX is slightly bumping up.
- I know it’s rarely riveting stuff, but the economy makes up the underpinnings for the broad market. So, if you have any interest in stocks at all, then you really do need to keep a close eye on what the economic landscape looks like.
The above is a true statement. I get it that some folks simply look at charts and use other technical analysis tools to find a trade or to gauge market movement, but the reality is the real market movers track economic data and then trade/invest on that data. So, if you want to be a player tracking the broad movement of the market, stay in tune with the economics of the world, particularly the US. But don’t make the mistake of listening to the breathless media’s take on the month-to-month data or the ad nauseum sensationalizing of a momentary blip. Burrow underneath to find the trend.
For example, yesterday’s announcement that US Durable Goods orders fell 1.3% in September meant nothing in the trend of the economy. It appears the market understood this judging from the market movement yesterday, but, just so you know, here is a look at the new-orders trend for durable goods in the US.
- And that’s what most media sources do – give you one month’s worth of information and make it sound like you have to make a trading decision right away on nothing but that one data nugget.
The market moves fast, sometimes too fast, and one can get caught up with the swift shifts in emotion, but the fact remains that the “trend is your friend” and the trend, my friend, is what define the longer-term movement in the market.
So, despite the talking heads, the celebrity analysts, the hill-top screamers, and the bevy of economists (doing their best but often being wrong) telling us to pay attention to the small, don’t. Look at the bigger picture and always remember, at the center of that picture is the US consumer.
- The Conference Board’s confidence store edged up from 89.0 to 94.5, which is the highest reading since 2007.
The market will likely fall today overall, but that is okay, It needs to take smaller bites and chew more carefully.
Trade in the day; invest in your life …
