The CPI report that came out on Tuesday had quite the impact on the market intraday but historically these news items have little to no impact on changing the market’s long-term direction.
Images like the one below shared by so-called experts with 'Head this' or 'Chief that' in their profiles along with a clickbait title are being plastered, retweeted and commented on across all platforms.
By allowing yourself to not fall into this noise, you greatly increase the chances of creating a portfolio that performs. It is important to remember that when it comes to accountability later on in life, these 'experts' won't be around. Just you and your decisions.
The good news is that this can easily be avoided, and you will see a complete change in your performance if you are driven enough to make the necessary changes.
The questions you have to ask yourself are:
- What impact do these reports have on overall market conditions?
- What do I need to know or do to protect my portfolio?
First, let's have a look at the impact of the CPI report:
- The S&P 500 fell by 4.5%
- The Nasdaq 100 fell by 5.5%
- The Dow Jones 30 fell by 4%
However, overall the stock market is still inside the range it has been trading in since the price found support in June. The CPI report has had little to no impact in affecting this.
The major indices since the CPI report have found support, and there has been no significant change in market conditions. The price on the S&P 500 is still trading around the trend line I highlighted in my previous article.
- If the market continues to drop, that is because of market conditions since the start of the year. Given the uncertainty in market conditions, you should ideally be standing aside and another reason not to feel the impact of the CPI report.
- If the market rallies, that is because of the bull revival since June.
Trying to understand why the market is bullish or bearish is impossible and detracts from what matters, which is simply accepting market conditions and investing in the right direction to make a consistent profit.
Not a quick scalp which only a handful of gamblers will have successfully guessed the outcome of the CPI report. Most will have lost. Brokers will have had a field day.
The brain craves complexity which is why the simplicity of sound investing eludes people.
I recommend a different approach and learning to look at the impact of news and reports (if you think they have any benefit at all?!) in terms of:
- What is the market doing now?
- What has changed since the news came out?
Over the years I have been investing, I have found that beyond the initial volatility and spikes, these news items just get absorbed into the market conditions at the time of release.
And so I pay little attention to fundamentals and focus on the technicals on the higher timeframes. I do my analysis at the end of the day, avoiding getting caught up in the intraday noise so I can make calm, objective decisions based on the asset's price and overall market conditions.
It is more straightforward, less work and consistently more profitable, which is the name of the game. You want a portfolio that performs whilst getting on with life.
Using technical analysis, applying patience for the right market conditions and then milking the long-term trends is how the finest investors/traders have done it since the dawn of the financial markets.
There is absolutely no need to reinvent the wheel. Instead, be savvy enough to align yourself with how the wheel moves, then sit back and watch the profits effortlessly roll in.
Most budding investors face the challenge of picking up enough (mis)information on the internet to think they are right but not enough to know they are wrong.
One only needs to look at their results to know where they are on their journey.
Image sourced from Shutterstock
