I'll give you a specific example: Like this morning in equities, metals: Inflation news caused a spike downward in both... and now the retrace has occured.... What can you glean from this 'pattern' of buying/selling behaviour? Seems to me it was like "OH MY GOD!" and then "Ah, no big deal"... Obviously, in the longer time frame it's easier to say what was the better indicator.. Does anyone have any experience or testing done that shows if the market's KNEE JERK reaction to news is any more important or valuable an indicator than the move that follows it?
I wait for the dust to settle. Either whatever caused the spike in price will disturb the market structure and start a trend or it won't. If it does there will be many opportunities to enter the trend and safely take advantage of it.
Your question goes to every debate, on every market-monitoring procedure -- whether shorter-term 'technical', or longer-view 'fundamental'. And what a great morning to cite as an example!!! We're back up to pre-market, fergawdsakes! I wish I had time to address this (open) question properly. I don't. So here goes: "It depends." There are different sets of actors. These actors have different 'relevant time horizons' AND they have different time/trading-volume constraints on their daily market activity. So, for some, it's a "Flush it!! Sell! Sell! SELL!!" agenda -- to be completed w/in 5 minutes of (news) release. For others, it's a much longer-term agenda -- whether they're buying or selling -- and they might seek to fulfill *their* agenda over the next week. (See, FED vis balance sheet lightening vis coming interest rate environment vis market PLUMMET...) But actors and their agendas and market net-effects are something we could throw around for quite a while, with relevant-but-differing views all 'round. "Good question!" though!!
All I can say is I was already long Gold from the 5th, this being in a long-term uptrend, so I'm happy. The news that affects uptrending instruments is usually good. Bad news has less (or no) effect).
BUT BUT BUT if tomorrow the market tanks again.... (full disclosure - was short gold, and got run over today, took my lumps and got out)...
what market doing (and especially why) is irrelevant for a trader what relevant is how the trader, using his method, will asses the situation (which he suppose to do constantly) so do not try to get the cue from the market, get the cue from your method