I've only been trading and familiar with the market since this spring, and have a question for the seasoned traders here: I've read quotes from a dozen or more talking heads over the past few months stating that you'll be able to look back and know the market has truly bottomed when it starts to rally on bad news. Today's news couldn't have been a whole lot worse, the outlook for the next year is dismal, our national debt is off the charts and climbing. However, knowing quite well that the market is completely irrational, could all the bad news be factored in and nothing will phase anyone anymore, therefore everyone wants to buy now before the prices go much higher? Or...are shorts covering like crazy again, the institutional traders waiting to build up for the next massive sell off, and it's actually time sell/short the rally?
That's the operative phrase in there. At any given moment, there is both a lot of negative news and a lot of positive news. The bottom line on what they're saying is that once it's gone up "a lot", we'll be able to find all kinds of justifications for why it did so (note: past tense) - even though those same alleged reasons were of no use in the moment. The bottom line of the bottom line is they don't know squat. Hope that helps! Cheers.
No one can call a bottom or top. But a lot of people here keep trying. If accidentally right, then they crow to the high heavens. Traders don't try to do this. They trade what they see - trying to extract some part of a move, and being willing to take some losses as the cost of doing business, using good money and trade management
=================== Nodo; Excellant question. Actually ''starts to rally on bad news ???????''; disagree with that completely. Again , note bear markets commonly retest monthly highs; reguardless of news, news/gossip on CNBC.[See all data,QQQQ,SPY.......] ========================================= Uptrends with months of bad /terror /terrible news[200 day chart means something]; that may mean something. One year with market reaction to hurricanes/Katrina cat storms, '' ''war on terror, & war on terror with new gov, '' ''market reaction to a Cuban or Chavez crisis, '' ''market reaction to famine, '' ''market reaction to wars, rumors of wars. one year 'market reaction to Israel hitting Iran/oil crisis in gulf perhaps................................... Actually i am an optimist, think the new Sec of Treasury Timothy G, is an excellant choice & & answer to wise prayer; but he can't do anything about a huricane, or Russian bear/Cuban -Chavez crises, or famine, or drought like 1929 or oil crisis. or deliver victory in war on terror...................
=========================== NoDo; Good question & nice timing on your question; QQQQ went down 1% or more today , its still a bear market[ price of SPY,DIA,QQQQ,IWM,USO,C, below 200 day moving average] Medium or long term shorts here will probably be profitable here ; but as you hinted, reaction to bad news, in a good bear trend matters.They should have sold QQQQ much harder, deeper; if[repeat if] its an excellant bear trend. So yes, 5 days of overbought prices matter some. But look on the most bearish of SPY or QQQQ; QQQQ really should have sold off much better on terror war on India Financial center. Its up for the week, low volume. And while its easier to manipulate one stock, Citigroup up again,17%+ , & above average volume; YHOO news noted Citi gave $50,000 to a Chicago non profit, probably a Chicago church or synagog.................................... Happy birthday