Thursday, March 17, 2011

News Driven

I don’t think it takes a genius to figure out the current market is news driven. But I know I’m not smart enough to know which news event is currently driving the market, or will drive it tomorrow, on the next day, and so on. What I know is whatever the news that is driving the market, it is reflected on the price, which is why I keep my eyes on the price action.

Here are a few current news event: ‘Potential nuclear meltdown in Japan’, ‘Middle East unrest could interrupt oil production’, ‘EU financial meltdown’, ‘Potential inflationary pressure from US deficit spending’, and more. Which one of these or other events is going to drive the market tomorrow, and how will that news event affect the price movement, up, down, or sideway? I will be the first to admit, I don’t know, I don’t pretend to know, and I will never know (and the truth is, no one will ever know!) That is why I keep my eyes on the price, because whatever it is it will ultimately reflected on the price.

With so many headwinds that can move the market, I don’t waste my time trying to figure out which news is moving the market. Instead, I look at the price chart of the SP500 and the Nasdaq 100, see what these two indices are doing and prepare for the next potential move. In a heavily news driven market, sometime it is best to stay on the sideline than go in and get chopped up. If there are too many counteracting news, I just move to the sideline. Presently, the price actions from the following charts are telling me to remain bearish.

SP500:



Nasdaq 100:



Whew! UCLA pull off a nail biter. Go Bruins!


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