Wednesday, February 27, 2008

Good news, bad news

In today's Barron's Online column I talk about the market latching on to good news and shrugging off bad news. That is typically what happens when the market is in bull mode and several colleagues have pointed this out in various IMs and emails.

But is it true? The market rallied Tuesday not when record housing foreclosures were announced or when Google cratered but when IBM announced a ginormous share buyback plan. It did not rally on lousy retail earnings outlooks but on the idea that the Fed is going to chop rates by another 50 basis points.

So, I don't think it was shrugging anything off and indeed was in a relief rally, thanking the stars that it had not broken down already.

Stranger things have happened.

2 comments:

aviator said...

Great Barron's article. In regards to the questionable validity of the symmetrical triangle breakout, are triangle breakouts actually reliable on a consistent basis in your opinion? As you pointed out with the overhead horizontal resistance it seems all too often that triangles are simply part of rectangle or some other variation.

On a different subject, do you perceive the upward breakout from the bullish flag in the yen to carry negative implications for the indices?

Thanks

Quick Takes Pro said...

Triangles are quite reliable in my experience. The problem is keeping them in proportion to the trend they are supposed to be reversing or continuing.

As for the yen and indices, I'll defer to another technician I respect who says that the rising yen is bad news for stocks.