someting i've noticed about inflection points in this market
I've noticed something that might, maybe, possibly have been acting as a leading indicator of inflection points in the market in the last 6 months.
When the market reacts to news in the wrong direction, it seems to forcast a change in direction. Examples:
-in late December / early January (my very first weeks as an investor) a string of negative news came out but the market rallied in its face. A headline on yahoo finance said "investors shrugged off negative news today, a trend that has increased in recent weeks" or something like that.
Shortly thereafter Alcoa kicked off earnings season with bad news and sent the market into a 2 month downward spiral. The market was going up on worsening news, and this led to, shortly thereafter, a violent turnaround.
-In late February and early March a variety of news that wasn't "end of the world" stuff cmae out, but the market crashed basically every day anyway. Reports, I think one was a better than expected retail number, came out and the market just tanked every day anyway.
Shortly thereafter an impressive rally began.
-In early may some news that I took as negative came out... swine flu. the stress tests reflected not-severe unemployment, several companies announced dilutions / share issuance, HIG lost its fanny and announced a dilution and promptly went up 75% in a few days, GNW lost its fanny and promptly went up 150% in a few days. ACAS rocketed almost 100% on basically no news.
Shortly thereafter we had the worst week for stocks in 2 months, with more to come?
It might be that we could all benefit a little bit from paying attention to times when the market reacts in the wrong direction to news.
I'm not necessarily hoping for a rally in coming days, I maintain that the market over the medium and long term would benefit from a short term pullback, for what its worth the end of this week saw the market dumping on what amounted to good news:
consumer sentiment is up again, and substantially again
industrial output again beat expectations and rose
good luck to everybody who's long