Today, when I opened Yahoo Finance to see what is going on around US Markets, I found something interesting. Below is the screenshot I captured. You can see Dow Jones, Nasdaq and S&P 500 Streaming Quotes on the left side and news headlines on the middle-right. What is funny is that most of the headlines are so negative but stock markets show a completely different picture!
GM stock target $0 !!!
Circuit Cty filing for chapter 11 protection !!!
DHL to cut 9500 jobs!!!
What does it show? Confused? Well, in fact, it is not surprising at all. This is precisely why it is advised to ignore news and follow charts, which incoroparate news in advance barring few unforeseen things. This is also known as "factoring in" of news into price.
I have always maintained and advised here to follow technicals when trading and forget news, the simple reason is - we can't be fast enough to always have breaking news at our steps and we can't be good enough to judge what a news can do to price. Many times the expectation of an event is almost accepted and so it already reflects in the price.