Please Don't Shoot The Messenger, But You Still Need To Understand This Message

However, the study concluded that "[m]acroeconomic news bearing on fundamental values explains only about one fifth of the movement in stock market prices." In fact, they even noted that "many of the largest market movements in recent years have occurred on days when there were no major news events." They also concluded that "[t]here is surprisingly small effect [from] big news [of] political developments . . . and international events."

In August 1998, the Atlanta Journal-Constitution published an article by Tom Walker, who conducted his own study of 42 years' worth of "surprise" news events and the stock market's corresponding reactions. His conclusion, which will be surprising to most, was that it was exceptionally difficult to identify a connection between market trading and dramatic surprise news. Based upon Walker's study and conclusions, even if you had the news beforehand, you would still not be able to determine the direction of the market only based upon such news.

In 2008, another study was conducted, in which they reviewed more than 90,000 news items relevant to hundreds of stocks over a two-year period. They concluded that large movements in the stocks were NOT linked to any news items:

"Most such jumps weren't directly associated with any news at all, and most news items didn't cause any jumps."

I know this is very hard for most to accept, but more and more studies have proven that news does not effect the market as so many want to believe. Again, as Elliott stated over 80 years ago, "[a]t best, the news is the tardy recognition of forces that have already been at work for some time and is startling only to those unaware of the trend...."

You see, if you understand that social mood is what drives people's actions, and those actions then cause results, and those results are then reported as news, it is not hard to understand what Elliott was trying to say over 80 years ago. This is exactly why news and fundamentals are always looking best at market highs, and worst at market lows. As Professor Hernan Cortes says:

"financial markets never collapse when things look bad. In fact, quite the contrary is true. Before contractions begin, macroeconomic flows always look fine. That is why the vast majority of economists always proclaim the economy to be in excellent health just before it swoons."

To take this a step further, consider a paper entitled, "Large Financial Crashes," published in 1997 in Physica A., a publication of the European Physical Society. The authors, within their conclusions, present a nice summation for the overall herding phenomena within financial markets, which is not directed by exogenous causation:

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Avi Gilburt is a widely followed Elliott Wave technical analyst and author of ElliottWaveTrader.net ( more

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