The Twilight Zone Trader.
In Slipstream Trader, Murray Dawes explained the bizarre state of the market in a recent update to his subscribers:
‘The twilight zone of bad news being good news and good news being good news can’t last forever…’
Sure enough, yesterday the RBA said:
‘This decision [to lower interest rates] is based on information received over the past few months that suggests that economic conditions have been somewhat weaker than expected…’
Weak economy? Why wouldn’t you buy stocks!
Of course, it’s not quite that simple. Investors try to buy and sell in advance of good or bad news. When you get the good or bad news, that’s often seen as the time to buy…or sell.
Investors who bought yesterday figured that lower interest rates would stimulate the economy, which would be good news for stocks.
Last week Murray told us that this is one of the toughest markets he’s traded during his 20-year career. We can see why when the stock market seemingly trades the opposite to what a rational person would expect.
But what the stock market did yesterday is history. What’s more important is what the stock market will do today and tomorrow.
Will the stock market continue with the ‘bad news is good, good news is good’ mentality? Or will we finally see Aussie investors wake from their daydream of believing Australia is the best-managed economy in the world?
Either way, the outcome will shock most unprepared investors. To make sure that you’re not shocked, you better get ready for more big market moves…in either direction.
This article is contributed by Money Morning. Click Here to Subscribe to their free newsletter.