Ignore Noise: Look at Market Action

I’ve made it a habit to ignore the many pundits out there who throw their opinion around about where the market is going to go. Looking at the market’s recent action, what does it tell you? Stocks surged the past couple of days. Last Friday, which was a distribution day (lower in higher volume), came on quadruple witching.


This options-expiration-driven selling is not unusual and doesn’t upset the market’s general ascent. A down day here and there on volume is tolerable, so long as they don’t ad up to too many, too fast.

So when I happened to visit CNBC.com to check on a couple stocks’ EPS projections, I couldn’t help but notice a big scary article about how a few market pundits thought we were “due” for a 5% pullback or so.

The markets instead have promptly moved higher. And they are doing this despite some negative news out there. This is a classic sign of a healthy market. Healthy markets blow off the negative news and cruise higher on the good news. Bad markets do just the opposite.

As far as deciding when and how much to get in goes, let the market’s current action tell you and decide accordingly. All you can do is play probabilities because no one has a crystal ball – and this is true for anything in life: starting a business, meeting a girl/guy, planning a vacation or seeing a movie. You never know what will happen, but you can go into the venture knowing you did your homework and that you stand a good chance of seeing your decision work out positively.

I can tell you what I am doing: I’m getting in. I dipped my toe in the market with some GMCR, it worked out and I bought more. I also picked up some PCLN. These are two excellent stocks with knock-out fundamentals and terrific charts that tell us the story: big money is flowing into them.

Will they absolutely work out? Who knows. But I do know that given their fundamentals, their story and their technical action, they are in good company as they match up well with great stocks that have come before them. All I can do is play the probabilities, cut my losses if I’m wrong, and ride the winner(s) if I’m right.