Head lines are bogus.

 

Fundamental analysis of financial markets suggests that the stock market trends are a direct result of news and events: A positive economic figure is released, and stocks rise; a destabilizing crisis occurs, and stocks fall.

In reality, however, the system doesn't run so smoothly. Watch the news headlines, and you'll see how often they report on stock prices reacting one way to a certain factor -- only to make a U-turn later and print a story that completely opposes the earlier one.

Take, for example this week's string of headlines regarding stocks and the September 21 Federal Open Market Committee. Here's a brief recap from some major news outlets:

September 21:

• "US Stocks Rally Ahead Of Fed Statement."
• "US Stocks Rise Following Fed Statement. The [central bank] signaled that they 'are prepared to provided additional accommodations if needed to support the economic recovery."

So, on September 21 the Fed news "sounded" bullish. The very next day, when the news clips above weren't even cold yet, stocks declined -- and the September 22 headlines used the same Fed news to "explain" why:

• "Stocks Fall On Concerns about the implications of further Treasury buying by the Fed."
• "Fed Policy Hints Weighs On Stocks."
• Chances are, if stocks rally tomorrow, the "Fed-led" headlines will be back as if no one was the wiser.
• Observations from Elliot-wave International.
• Eduard Hamamjian
• GeaSphere LLC