Technical analysis is great, just remember it only takes one news item or one bogus government report and you can throw it all out the window.
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Technical analysis is great, just remember it only takes one news item or one bogus government report and you can throw it all out the window.
Not quite so fast my friend! Most news reports are pre-priced right into the market. If you know what to look for, you will see the signals. I will give you a perfect example. Right before the Brexit happened all safety trades declined and markets went up. Leading up to it, everyone knew it was about 50/50 based on polls. However, the day before the vote, Gold went down, USD went down, treasuries went down, GBP went up, Market indicies went up. This is a classic shakeout pattern and I posted this to all of my investing friends. This is the exact comment copied from June 23rd:
''In my experience, everything moves the opposite direction before a big move. Gold is down, vix is down, usd is down. Everything is telling me that they will all reverse tonight. All the technicals are screaming brexit tomorrow. I'm considering 200 shares of UVXY, risk of 10-20% downside if I can get out early tomorrow, 200-500% upside if brexit goes.''
I bought UVXY options and made I think 15% over night, though if I had been able to sell them at 4am, I would have made 200-400%.
So aaronh, yes, I agree that some news can change the markets, but much more often the markets move before the news. Here is a second example: Last week, everyone was super bearish on Crude and every news article was talking about 20$ for crude. Crude, however, was at it's 50% retracement of the previous upward move in a bullish market. I bought triple leveraged uwti and have made a good amount of money watching as crude goes up. This week's headlines are all about reasons explaining crude's rise such as a potential Opec freeze (which will never happen) and other silly headlines. The point is, markets move before the news and despite the news, very often.
Lastly, look at Brexit ''terrible news'' and yet all markets are rallying up above all time highs...
Just some things to think about!
-JT
Your absolutely right. I do better when I don't know the news. It's all about supply and demand / patterns and rules.