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Here's What's Missing From Stock Market Analysis

Published 04/21/2015, 07:51 AM
Updated 05/14/2017, 06:45 AM

Something has been lost in stock market analysis. This statement may come as no surprise to you. You have seen the evolution from getting your financial news from a newspaper to television onto blogs and now 140 character tweets. You have seen calls for outrageous moves in the market, both up and down, whether it is Dow 30,000 or a retest of the S&P 500 at 666.

Experts in one field have no problem talking with conviction about something they have only watched from afar for years or decades. On the other extreme, with the growth of do-it-yourself tools, everyone is a stock market expert with their own system and newsletter. I am not going to name names, because that is not the point of this message. You will form your own opinions about these items and how they have created a misdirection, or a void, or have lost value.

What I see as missing is an acceptance of the broad market’s ability to do nothing. This is probably the first thing that fell out of financial journalism. Probably because it is not sexy to have a view that nothing is going to happen. But every step of the way along the paths outlined above has been filled with directional statements. But there are not two directions for the stock market. There are three: up, down and sideways. How often have you heard someone in the press or on television or in a blog suggest that the market will just go sideways.

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Oh, it does happen. But it is a very rare thing. Why is that? The S&P 500 has been moving sideways since October, for 6 months. I carry the view that the S&P 500 is in a sideways correction that may continue for several more months. And I’ve said it in recorded sessions (I’m still waiting to be asked back). The Russell 2000 moved sideways for 16 months. This is not a brief period of time. So why is it so rare for the expectation to be for nothing to happen?

I can only imagine it is because of the fast paced world we live in where we get our news from a firehose. Nothing is expected to standstill because nobody can stand still. One thing seems certain though, it is not likely to become sexy to profess that nothing will happen over the next whatever time period. Consider that when you find your preferred source of news in the future.

Disclosure: The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

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