If you are trading this market, there is one very important thing you need know — news does not matter. We have had a number of negative news events this week that failed to produce the logical response. This is not new. It has been happening since the Brexit vote in the UK and the Presidential election last November. In both cases, the outcomes were supposed to be negative and we ended up with positive reactions.
So far this week the North Korean missile testing and Hurricane Harvey have failed to produce a negative response. Today, a weaker-than-expected jobs report has had no impact on the market.
All of these events, which have negative repercussions to some degree, have triggered nothing but buying by computer algorithms. The ultimate impact on the market and economy doesn’t matter. All that matters is the price action created by the programs.
The lesson is that you can’t predict market action by analyzing news events. There are many well thought-out arguments every day about how elections, hurricanes, missiles and economic news will drive the market — but none of that logic applies. It is the money flow created by computerized buying that drives the action, and nothing else.
The irony is that if you are looking for something to trigger a market correction, the most likely catalyst will be no event at all. The market will reverse when there isn’t any specific news that triggers the reflexive computer buying. There will be a pullback — and when there isn’t any news to trigger the dip buying, it will gain some momentum.
I have no idea when that will happen, but if you think you can predict this market based on news, you are going to have a very hard time making money.
The indices continue to drift upward on very thin volume. It is a good example of what often happens in front a long weekend, when people are in a good mood and not in a hurry to make major trading decisions. Go with the flow and the flow is upward.