Look ahead 6 months with 3 stock market guidelines
Part 2 of 4: White Top View, Market Direction series
Investors use data to look forward, typically about 6 months. While not strictly a prediction, it expresses near term expectations of economic direction. That so called predictive function can strongly suggest the most probable future. That can tip us off to both opportunity or danger in the markets. We can use it as either or both a big money-maker or capital saver!
This discussion follows, Part 1: White Top View, Market Direction series, 3 Stock Market Guidelines replace endless reports. In this post we consider the desire to know the future direction which motivates much research. Seeking, compiling, identifying and reporting indicators keeps many people busy.
Occasionally deep analysis of data provides insight. However, much more often the many reports contribute to a patchwork. From that patchwork a complex economic picture emerges. Rarely is the picture clear.
The various reports can support, contradict or confirm one another. There is never complete agreement or data harmony. Typically the view forward is obscured, foggy and with significant contradictions. All efforts to assess and interpret current economic data are uncertain at best.
Investors use data to look forward and understand a continually changing picture
Most frequently our vision of the economic picture changes slowly. The outlook changes between bright, vibrant and positive to dull, gloomy and negative.
At times the transition can be sudden but much more often the changes happen gradually occur over periods of months or years. These changes in outlook happen because the data have changed. Investors use data to look forward so keeping in touch with the data keeps you in touch with market direction.
We do not want to spend any significant time invested on the wrong side of the market. That makes any change in direction a most critical point when tracking data.
So far no very reliable indicator of future trend changes has been identified. So I recommend following the guideline data as the key to know market direction.
Pulling together direction and tone investors use data
The way I put this together is to note the trend. By looking at the charts of the stock market indexes we can see that currently the trend is up. So the market is saying the economy will most likely be better in the next 6 months.
The improving economy and current market uptrend gives is confidence that the market will likely continue to rise in the weeks and months ahead.
There will be volatility. It could be choppy. But I expect that overall, it will be up.
The vast amount of data available can confuse rather than clarify and help. So we need something far simpler. In our next discussion we will discuss a much easier way to identify how investors use data to look forward and see the most likely market direction.
How do you see it? What direction do you think is next?
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White Top Investor
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