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inthemoneystock (< 20)

Trade Lesson: Stock Market News Is Garbage



November 30, 2011 – Comments (9) | RELATED TICKERS: DIA , SMH , JPM

For the average person who invests or trades, saying the news is garbage is a sin. However, it is proven over and over again to be the case. The news is nothing more than a way to take money from the bottom 99% and distribute it to the top 1%. Those at the top control the news and release it to cause certain reactions. Those reactions are carefully calculated to achieve certain goals. Those controlling these avenues and directing the markets are the Federal Reserve banks around the world and the top institutions.  Today, the markets are surging once again, the SPDR Dow Jones Industrial Average ETF (NYSEARCA:DIA) is trading at $119.64, +4.08 (+3.53%).

Last week, the media was pushing doom and gloom. TV stations like CNBC were bullying the average investor to sell or short the market. This past Monday, the markets ripped higher on a "mention" of a possible Euro bond from Angela Merkel, the head of Germany. Tuesday, the markets paused and many traders started to wonder if the move up was a one hit wonder. After the bell, news hit the markets that many banks like Bank of America Corp (NYSE:BAC) had their credit rating downgraded. This sent more shorts into the market and investors running for cover. Today was destined to be a bloodbath, or so the average investor though. Yet, here the markets sit, the Dow Jones Industrial Average up over 400 points.

Investors and traders are lost because they listen to the news. One day the markets collapse, the next day they rally, one hour there are credit rating downgrades and a near collapse in Europe, the next the Federal Reserve and other Central Banks are saving the day. It is virtually impossible to trade off of news. The news is garbage and cannot be used to make money consistantly these days.

So what is the answer?

The answer is the charts. The charts never lie and always dictate the future. To give examples, lets talk about last week. Just last week, as the doom and gloom hit its highs, average traders were selling and shorting the market. The market was clearly going to bounce. This allowed for long alerts on the Semiconductor HOLDRs (ETF) (NYSEARCA:SMH) and JPMorgan Chase & Co. (NYSE:JPM). In addition, a long was given and triggered on the SPDR S&P 500 ETF (NYSEARCA:SPY) at a price of $117.65. Today, the SPY hit a high of $124.50. That is a monster gain of $6.85 in less than five trading days.

The S&P 500 had a pause day yesterday. After a huge move on Monday, a pause day is known as a bullish signal. If you looked closely at the 60 minute S&P 500 chart, an amazing bull flag had formed as well. All signals were pointing to another monster up day. After the bank credit rating downgrades, the average traders once again thought the downside was obvious. However, if you just followed the charts, you would have been on the right side of the markets and made money.

Never be a bull or bear, be an neutral investor and trader who trades based off the charts.

Gareth Soloway

9 Comments – Post Your Own

#1) On November 30, 2011 at 12:56 PM, zzlangerhans (99.84) wrote:

I can see your expertise in pointing out how last week's chart predicted this week's market activity. So, what's going to happen next week?

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#2) On November 30, 2011 at 6:32 PM, TSIF (99.97) wrote:

ITMS: It would be interesting to see how your vast expertise worked with some CAPs picks. Help us learn how to apply your success with the charts in real life by making corresponding CAPs picks.

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#3) On November 30, 2011 at 7:10 PM, wolfmansbrother (< 20) wrote:

I agree with your premise, but not your conclusion.  Making trades based on the market news doesn't seem to be a winning strategy, because everyone else is getting the same information and the insiders have already made their trades before the rest of us even read the story.  Frequently trading, in itself, racks up commissions and capital gains taxes that gobble up returns.  However, basing our future predictions on the shape of what has already occurred in a chart seems too much like voodoo to me.

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#4) On November 30, 2011 at 7:46 PM, truthisntstupid (91.09) wrote:

Charts measure investor sentiment. 

As such, how will charts help you when investors are overwhelmingly bearish on a company with outstanding fundamentals?  

Or overwhelmingly bullish when a company is already selling at a ludicrous valuation?

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#5) On November 30, 2011 at 7:52 PM, truthisntstupid (91.09) wrote:

However, I agree that stock market news is often of little value, unless one takes advantage of opportunities the market presents to buy strong companies that have fallen out of favor because of unsatisfactory developments temporary in nature.

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#6) On November 30, 2011 at 8:14 PM, goalie37 (88.09) wrote:

The great thing about CAPS is that all of us have our theories, along with facts to back them up.  You present your thesis that news is garbage at best and manipulation at worst, leaving technical analysis as the only viable solution.  What I would like to see are some CAPS picks to offer as proof.

I confess to knowing almost nothing about chart reading, so it would be interesting to watch it at work. 

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#7) On November 30, 2011 at 8:31 PM, shamapant (< 20) wrote:

Agree with all the fools above. Also, i think that you are forgetting that even without charts, investors can profit from the news-as many fools here have done. We buy when the news is bringing everyone else out of the market and sell when the news is overdone. I am sure lots of Fools here have been getting more into the market than getting out, and its not because of the technicals. That being said, from my brief foray into charting I deduced that too much of it is based on 'above the ground' moving averages and the such that are more of an effect than a cause. Nice to see a technical analyst who uses real information like the news to supplement their charting.

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#8) On November 30, 2011 at 9:04 PM, centsornoncents (28.93) wrote:

I can confess that before I got into stocks, I was into the foreign exchange.  There I learnt about candle formations, price levels, trendlines, day/hour/15minute charts, Fib levels etc.

For instance.  Candle formation can tell you where something can go.  Yes, it isn't set in stone but it keeps you on guard. A Drandonfly Doji alone doesn't necessarily signal a bullish run but aided with a support trendline from a couple of previous lows, plus say a 200 day moving average can signal a huge level of support. The 3 of them together can signal a massive bounce. If this is on the Day charts, then usually you will go into the Hourlies and look for another formation to enter the stock. 

I look at stock trading as accumulation of as much knowledge that you can take in before making a conscious decision.

 Yes in the long run, a couple of dollars difference in a stock 5 years from now will make no difference but honestly, do people really keep stocks for more then 6 months nowadays?  Of course they do but why own a stock for 5 years to make say 50% (minus div) when if trading on the charts you could have bought the same stock maybe 10 times over that period (buying low, selling high) and maybe make +120% over the same period with the same stock!  Yes, it's more work but then its more money.

Just looking at AAPL for instance.  Looking at charts, it was obvious that the stock was going to travel to the 200 day moving average (~$363), and as a general rule, if it hits this line it will almost certainly bounce.  In under 5 days, it has gone up almost $20 a share!

 I have been watch ITMS on youtube for a while now and I can tell they know what they are doing.  Just waiting for a spare week to join the free trial so I can sit down quietly and learn properly their techniques, many of which I already know. This is no way a join ITMS so much as learn to study the charts, it really helps with when to buy a stock whether you are buying to hold or to scalp. 

 They could do the CAPS but remember, most of these guys are holding onto stocks for less then a week...  CAPS is for the longterm in my opinion. 

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#9) On November 30, 2011 at 9:36 PM, shamapant (< 20) wrote:

^ true and you cant close out a pick in less than 7 days-makes technical trading hard to demonstrate. I think a better way to show this in action would be to blog trades.

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