By Jeff Pierce
A lot is made about what is real in the markets. If a market goes up on low volume is it real? My best guess is traders are attempting to discern if the rally or move higher has lasting power. Does that mean it bullish and it's OK to buy stocks? Or does that mean that this current rally is doomed because the fundamentals and macro data is so bad that there is no point in even trading and we should just start going to the casino because at least there we'll have a little bit of fun as we watch our money drain out of our pockets.
If you are using today's headlines to trade then you are in serious trouble. If you are using last weeks or even last months headlines then you again, are in serious trouble and are experiencing frustrating and confusion about how to proceed in the market. The market is forward looking, by at least 6 months and that has been the standard for a long time. Maybe it's shorter, maybe it's longer by now since everything is dynamic in the markets.
So how do you trade in the now and yet trade based on a market that is digesting unreported news from the future? Well, unless you have a time machine then you had better figure out your method of choice for analyzing the markets. For me that is a combination of my market timing signal/technical analysis, my own personal trading, and stock screeners. Oh, and a steady diet of absolutely no media, news, or reading others opinions to a large degree. On twitter it's impossible to avoid everybody's thoughts as that is all it is, but I never let these biases get inside my head. If anything I quantify other's opinions in a form of a crowd sourcing bias and in a way that becomes a 4th factor in my market analysis.
I would really like this to become some sort of think-piece that gives you the holy grail of how to decipher what is real and what is not in the markets, but I can't do that because I don't really know what is real. But you know what... I don't care. I don't need to know to profit and navigate through what others would say is a "untradable market". I would disagree and say the market has been extremely easy to trade recently if you focus on your trading system, high reward/risk entries, and control your position size. In essence, you solid trading rules and leave it up to others to interpret what the market should or shouldn't do.
To be honest, I believe it's all an illusion. The market, the media, and to some degree the participants. Bots aren't real and they are a high percentage of the markets. The markets aren't tangible and only exist in concept, and the media is nothing more than an opinion at best and a smokescreen at worst.