If “fundamentals” drive trend changes in financial
markets, then shouldn’t the same factors have consistent effects
on prices?For example: Positive economic data should ignite a rally, while
negative news should initiate decline. In the real world, though,
this is hardly the case.
On a regular basis, markets go up on bad news, down on good
news, and both directions on the same news — almost as if to
say, “Talk to the hand cuz the chart ain’t listening.”
Unable to deny this fly in the fundamental ointment, the mainstream
experts often attempt to reconcile the inconsistencies with phrases
like “shrugged off,” “defied” or “in
spite of.”
That begs the next question: How do you know when a market is
going to cooperate with fundamental logic and when it won’t?
ANSWER: You don’t.
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Take, for instance, the first three news items
below regarding the July 22 performance in crude oil, versus
the fourth headline, which occurred on July 23:
- Crude prices surge nearly 4% in their sharpest one-day
percentage gain since May. The rally was “aided by fears
that Tropical Storm Bonnie will enter the Gulf of Mexico
over the weekend and disrupt oil production.” (Wall
Street Journal) - “Oil Prices Soar As Gulf Storm Threat Looms” (Associated
Press) - “The storm should keep oil prices bubbling if it
continues to strengthen and remain on track.” (Bloomberg)
vs.
- “Oil Slips From Surge Despite Storm Threats” (Commodity
Online)
Unlike fundamental analysis, technical analysis methods don’t
rely on the news to explain or predict market moves. They look
at the markets’ internals instead.
Get
FREE access to Elliott Wave International’s most intensive
forecasting service for the global Energy markets. Now
through noon Eastern time July 28, you can get timely intraday
charts, forecasts and analysis for Crude Oil and Natural
Gas. You’ll also get daily, weekly and monthly analysis and
forecasts for all major Energy markets and Energy ETFs. Access
FreeWeek now.
This
article, Free Insight Into Crude Oil’s Next Big Move,was syndicated by Elliott Wave International. EWI
is the world’s largest market forecasting firm. Its staff
of full-time analysts lead by Chartered Market Technician Robert
Prechter provides 24-hour-a-day market analysis to institutional
and private investors around the world.
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