The market has a predictive function
Up or down, the trend is your friend
Up, go long, down go short or get out
Part 1 of 4: White Top View, Market Direction series
To know the market direction, use these three stock market guidelines rather than endless expert reports. The market looks about 6 month ahead anticipating where the economy will be going during the next two quarters. Identify that trend, up or down and take positions that benefit from that direction. When the trend is up, play long. When the trend is down, play short or get out.
Using those basic guidelines you can replace 10, 100 or 1,000’s of economic studies, reports and opinions.
10 to watch for just one thing! Again…
Where is the market going?
We want just one thing, the answer. And we want it now!
In the market there is never just one thing. The market is a complex and noisy place. It quickly reflects the short-term emotions and opinions of participants. At a more measured pace it also arrives at a market value for each stock listing.
All the data and noise combines to make up the complex interaction of the stock market. To know what to do, we need to make sense of that ocean of data.
Information continually flows and comes from many sources. It includes government agency releases to private reports or academic findings. The data sets range from fact collections to opinion surveys. Each contributes part of the information needed to paint an overall picture of the economy. That in turn can give the most likely stock market outlook and direction.
As an example of the never-ending data flow, this week we see multiple significant economic reports as listed below:
1. Purchasing Managers Index – monthly private sector survey reports that their business is better, worse or the same.
2. S&P/Case-Shiller Home Price Indices
3. Conference Board Consumer Confidence Index
4. Core Durable Goods Orders
5. New Home Sales
6. Crude Oil Inventories
7. Unemployment Claims
8. Pending Home Sales
9. Personal Spending & Core Personal Consumption Expenditures
10. Revised University of Michigan Consumer Sentiment
Without full-time dedication you can not possibly pay attention to and understand that volume of data flow. It continues with many more such reports week after week.
The guidelines noted at the beginning of this discussion help us cut through the ocean of data to understand and make use of the information. To invest or trade well we need to get a basic indication of future market direction and trend.
Noting the overall tone of the reports, either positive or negative, as well as how the information trends helps us anticipate the future. Either things are getting better or worse. Today’s point, be content to know which way we are generally trending.
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White Top Investor
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