The news cycle is curve fitted to market action. Let me say this again for emphasis: The news cycle is curve fitted to market action.
What does this mean exactly? Very simply, the news flow of the day, week or month is tailored to whether the market is up or down. Investors have a tendency to believe that news, whether economic data related, macro related, geopolitical related or politically related is driving prices. This is wrong.
It is prices that are driving what you are being made to pay attention to on any given day.
The current news cycle is very trade deal, tariff and China heavy. Investors are being setup here to believe that no trade deal means that there is no chance of a sustained bull market.
The trap is already set for a conflict between price and the news flow, creating the impending ambush for investors who choose not buy into the market because they believe that a sustainable rally must be predicated upon a trade deal.
While it's still too early to tell of the intermediate to long-term voracity of Monday's bottom in the markets, the manner in which it kicked off today just raised the chances of this being a bottom of some significance exponentially. It already has markers of something that is about to leave all those who buy into the negative news cycle wondering why their ability to understand the big words in the Wall Street Journal isn't being rewarded by the market.
In the meantime, as the market continues to rally, investors will remain on the sidelines believing that negative news regarding the possibility of a trade deal is going to create sustained downside in equities.
It will only be once equities sustain the rally on the upside that the news cycle will suddenly change. Your attention will be slowly taken away from a trade/tariff and China focus into a positive framework that will satiate the intellectual and emotional senses of market participants. The negative news cycle will disappear, only to be replaced by any series of positive highlights that are yet to be determined.
The only reason to pay attention to the news cycle is so that an investor can understand what are common beliefs in order to create a thesis about how the market is about to shatter all of those beliefs one by one.
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