03/03/2011 – Breaking News Bulletin: News Is NOT the Main Driver of Stock Market Trends

Conventional economic wisdom is founded on one core concept:
namely, that events that exist outside the market (part of “market
fundamentals”) trigger trend changes in the financial
markets.

Because of this belief, you have the mainstream experts of
finance watching everything from weather patterns to crop conditions,
political exploits to the subtlest changes in punctuation in
the Fed’s minutes — all in the hopes of anticipating the next
big move in commodities, stocks, gold, the dollar, etc. In
a nutshell, “positive” news and events cause a rise
in prices, while “negative” news pushes prices down.

In reality, however, things are not as clear-cut. Markets
regularly “ignore” the news, shrug it off — and
move in the opposite direction of their “fundamental” cues.
OR, worse waver in two different directions after the same
event.

Take, for instance, the recent slew of news items following
Federal Reserve chairman Ben Bernanke’s March 1 testimony before
the Senate Banking Committee:

• “US Stocks Advance Ahead of Bernanke’s Testimony” (International
  Business Times)
• VERSUS — “US Stocks Turn Lower As Bernanke Testifies
  To Congress” (NASDAQ)
• VERSUS — “US Stocks Rise With Bernanke In Focus” (MarketWatch)
• VERSUS — “Stocks Decline As Bernanke Comments Fall
  Flat.” (Wall Street Journal)

What often ends up happening is this: Because the original
event fails to predict the movement in stocks, commentators
then sift through the day’s news feed in search of a different “trigger” —
one that fits price action AFTER the fact.

The fallacy of a news-driven market is the first misconception
exposed in Elliott Wave International’s Club EWI free resource “The
Independent Investor” eBook. Here’s a short preview
of this eye-opening report.

Chapter 1 opens with the question “What Really Moves
the Market?” You then get the answer via riveting excerpts
and charts from EWI president Bob Prechter’s monthly Elliott
Wave Theorist publications, such as this one below:

“Suppose the devil were to offer you historic news
days in advance. He doesn’t even ask you for your soul in
exchange. He explains, ‘What’s more, you can hold a position
for as little as a single trading day after the event or
as long as you like.’ It sounds foolproof, so you accept.
His first offer: ‘The President will be assassinated tomorrow.’
You can’t believe it. You and only you know what’s going
to happen. The devil transports you back to November 22,
1963. You short the market. Do you make money?

The first arrow in Figure 6 shows the timing of the assassination.
The market initially fell, but by the close of the next trading
day, it was above where it was at the moment of the event.
You can’t cover your short sales until the following day’s
opening because the devil said you could hold as briefly
as one trading day after the event, but no less. You lose
money.”

Independent
Investor eBook further exposes 10 other commonly held economic
beliefs for what they truly are: Wall Street myths disguised
as reality. Here’s what else you’ll learn: 

• The Problem With “Efficient Market Hypothesis”
• How To Invest During a Long-Term Bear Market
• What’s The Best Investment During Recessions: Gold,
  Stocks or T-Notes?
• Why “Buy and Hold” Doesn’t Work Now
• How To Be One of the Few the Government Hasn’t Fooled
• How Gold, Silver and T-Bonds Will Behave in a Bear Market
• MUCH MORE

Keep reading this 118-page Independent Investor eBook now,
free — all you need is a free
Club EWI profile.