Saw a lot of this yesterday when the markets dipped. There was no story. It didn't have anything to do with a government shutdown, or China, or a butterfly flapping its wings two days ago somewhere in Europe.
The market simply overextended on euphoric, greedy trading, which happens frequently, and then corrected itself. I'm usually not a huge fan of technical indicators, but the bollinger bands (or even just the 20-day moving average) will show you the stretches and corrections. Further, the mounting buying volume, although punctuated by occasional spikes of selling pressure, shows us that the market will continue to rise after this retracement has finished.
We're all human, and it's natural for us to find the cause and effect, and to look for the meaning behind everything. But grasping at straws for news events to explain these types of price movements shows a fundamental lack of understanding of the way prices move in a market. In turn, that lack of understanding may lead to unfavorable outcomes for your portfolio.
Often, these price extensions and retracements occur for the same reason that your friend who is always 15 minutes late to everything was late to work yesterday. It's just typical behavior.
(note: this is not to say that news never affect prices; rather, it is more customary for the prices to affect news)
Submitted January 17, 2018 at 08:57AM by 100PercentBonds http://ift.tt/2DdSM43
