The Market Already Knows
After you’ve
studied and traded the markets for many years, you’ll find it
difficult to not be amazed at how remarkably the price and volume action mirror
major news events both in the present and in the future.
There seem to be two dimensions of anticipatory talent traders
say the market has about news and major cycles in the economy. On one hand, it
has been widely observed that where overall economy is concerned, the market is
looking ahead about six to nine months. Thus, we’ve observed in the past how the
market tends to bottom out while the economy, by conventional economic measures,
is still deep in a recession. That’s because the market is already looking ahead
at economic recovery.
Yet, all day long, those in the news media and traders
themselves are watching for analyst upgrades and downgrades and for the next
interest rate cut by the Fed. We do this anticipating that the market will react
instantaneously to these events.
When you watch the unfolding patterns in the market and
individual stocks, sometimes you’ll see multiple patterns we all recognize
converging within individual stocks, across many stocks in different groups, and
across many groups simultaneously around the time of an anticipated Fed
announcement.
This is the case with the Nasdaq
(
COMPX |
Quote |
Chart |
News |
PowerRating),
Intel
(
INTC |
Quote |
Chart |
News |
PowerRating) and Sun
(
SUNW |
Quote |
Chart |
News |
PowerRating)–which I talked about in my “Chart of
the Day(s)” from Wednesday,
Thursday,
Friday
and Monday.
You can
see this also happening in Oni Systems
(
ONIS |
Quote |
Chart |
News |
PowerRating). It’s at a crossroads of its
50-day moving average, a downtrending trendline, and its 61.8% retracement (Dec.
highs and Jan. lows). Moreover, short-term volatility in ONIS is contracting
within a pennant. Volume has been heavy on the buy side.
There is
no way to predict, however, which way all these congestion patterns will pop.
There is a lot of optimism of about
a 50–basis–point
rate cut and I’ve been hearing all day long about how that’s going to give a
boost to the market. But the market already been moving higher, perhaps in
anticipation of the rate cut. Also,
the fact that the market will, on a bigger–picture
basis, move in a manner that is consistent with where the economy will be six to
nine months from now–certainly complicates things.
See you
tomorrow,