Have we seen the bottom of the market? Is the trend going to turn up?
Many people look at the market as a sort of game. It goes up and down. They try to guess what the next market move will be. The market is viewed as a sort of real life slot machine. “Maybe I’ll hit it big?!” In the end, most leave the “casino” shorn like sheep.
Accurately predicting the market’s short term movements is impossible. Sure, some people predict it correctly once in a while, but you can’t rely on a SINGLE prediction. The key to analysis is having a larger sample size. In other words, predictive capability needs to be measured by the long term average. This is one of the most basic premises of statistics.
Short term market movements are generally just noise and right now we’re hearing a lot of noise. Long term, the markets will accurately reflect security values, but long term isn’t tomorrow.
The markets are connected to the economy. Because the cause and effect between the two is not tightly synchronized, market participants forget that the markets have their basis in the economy. Currently, many important economic metrics are going South and picking up speed. This “squishy” relationship is not assessed properly by those claiming that the market has bottomed.
The long-term economic pain is just beginning to rear its ugly face. We’re likely to see more ugliness in the months ahead.
For now, I am watching closely the evolving economic events and keeping my powder dry as the blood in the streets is only a trickle at this point!
Be smart, be well-read, be aware and be successful.
