Constant news in and constant news out. That is the flow of the market. I would like to call it a problem, but if a thing is the norm, and life revolves around it, then how could it be a problem? It is something you just learn to live with. The daily news flow, and the market’s reaction to that flow, is something market players just learn to live with.
The important thing to understand about the daily news flow is that it is ultimately not important in the formation of the overall market mindset. Now, if you are a day trader, daily news matters, but if you trade the market more broadly, it is best to look beneath surface where the current runs more smoothly without all the debris that floats on top.
- U.S. stocks opened slightly lower on Friday, as the latest economic data gave little insight into the health of consumer spending.
The above is a case-in-point. The sentence above suggests that the economic data on retail sales and import prices for August that came out today is ambiguous, that somehow the market needs more oomph in the data to see the economic future more clearly. But, if you look just a bit deeper, you can see this is nonsense. The data is clearly strong and it points to a more substantive economic future.
- In August, receipts at auto dealerships jumped 1.5 percent after advancing 0.6 percent the prior month. While sales at service stations fell 0.8 percent, that reflected declining gasoline prices, which should free up income and support discretionary spending in the months ahead.
- U.S. import prices recorded their biggest drop in nine months in August as a sharp decline in the cost of petroleum products eclipsed rising food prices, keeping imported inflation pressures subdued.
See what I mean? The above data gives plenty of insight into the health of consumer spending – it is doing fine and it probably will get better with the drop in the price of gasoline. That is about as clear a signal as the market needs to see the future.
As well, there is more news the market skipped over today and that news comes from across the pond. Remember, Europe is the largest trading partner of the US.
- Europe’s big banks returned to growth mode in the first half of this year, expanding their books by 530 million euros ($685 million), in a sign they are starting to get back on their feet after the financial crisis.
Yet, the market dropped right out of the gate today. It is staging a comeback as I write, but that just demonstrates the range-trading and the news today did little to improve the trading situation of the market. It seems bent on waiting for a catalyst to take it higher than its recent highs. It seems bent on consolidating its base so it can take the next leg higher.
- Complacency is already in our stock market judging from the extreme level of bullishness in the various sentiment surveys, but sentiment alone does not usually have a direct impact on stocks. There is usually a catalyst first.
The sentiment right now seems to be: all is fine where the market is. That feeling is keeping the market floating about, up and down. As I said yesterday, the market is waiting for a catalyst, something other than the daily flow of news, good or bad. That catalyst will come. We just don’t know when.
Trade in the day; invest in your life …
