The markets story should convey that stock movements are complex. The Street’s lede on the Tuesday before Bernanke’s Jackson Hole appearance back in August cited multiple reasons behind the stock surge.
Stocks staged a mighty rally Tuesday, even shrugging off the uncertainty presented by a rare East Coast earthquake, as all three major U.S. equity indices gained at least 3%.
Early buying was attributed to positive global economic data, which overshadowed another weak read on the U.S. housing market, as well as growing investor optimism about a high-profile speech due from Fed Chairman Ben Bernanke at the end of the week. The gains accelerated ahead of the close after the S&P 500 broke past 1150, a key technical threshold.
We’re not doing heavy-duty investigative work in the markets report, but we’re still obliged to give our readers the best snapshot of reality that we can. The challenge is how to balance this obligation with the pressures of writing under deadline. When the market decides to surprise us just minutes before the closing bell, we still have to handover our copy within reasonable time. The question is, what’s it going to say.?
The easy way out is to pin credit or blame movements on one or two events of the day. But getting closer to the truth, as with most stories, requires giving readers more context and multiple angles, and through that, an implicit acknowledgment of a narrative’s complexity.
"Throwing our hands up is just as extreme an overreaction as pinning a day’s move on a single event. For one thing, it’s a sure way to lose readers, who are grasping for an explanation."
In centuries past, when sickness plagued a village, citizens grasped for answers from priests and other holy men. Their unwavering counsel: "buy on the rumor and sell on the news."
Just kidding! Actually, they said it was witchcraft.
#1 Posted by Edward Ericson Jr., CJR on Mon 3 Oct 2011 at 04:28 PM
Reminds me of the caption in the New Yorker under a cartoon of a television stock market reporter: "On Wall Street today, news of lower interest rates sent the stock market up, but then the expectation that these rates would be inflationary sent the market down, until the realization that lower rates might stimulate the sluggish economy pushed the market up, before it ultimately went down on fears that an overheated economy would lead to a reimposition of higher interest rates."
#2 Posted by Mike Robbins, CJR on Mon 3 Oct 2011 at 05:45 PM
A new software program, HFT Alert, was released last week. HFT Alert monitors for HFT and Algorithmic trading systems and the stocks being targeted. It works in real time and has various detection algorithms built in that will identify 'flutterers' and 'cycle repeater' algo among others. It also shows the overall level of activity across exchanges.
Today's activity was extremely high, much higher than the last several big down days. This software is very useful especially for portfolio managers and traders monitoring groups of stocks.
There's info at the website at www.hftalert.com. Some videos as well.
#3 Posted by Steve Hammer, CJR on Mon 3 Oct 2011 at 08:01 PM
I've been a business editor for almost a decade and a half. The daily scramble to ascribe reasons for the market slipping half a percent or nudging up two-thirds a percent is often comical, not so often illuminating. I think Taleb largely has it right when he says we screw up these stories. There is usually no single, overarching reason -- or at least none that we are able to ferret out that fits in a nice, neat box. I tell people: If someone drops a nuclear warhead on Manhattan, the market will plunge and a stocks writer will be justified writing, "The S&P plunged 40 percent because a nuclear warhead exploded over Manhattan." But what's more typical is that the market sloshes around, and why that's happening isn't so easily explained. Still, I know the box this reporter is in. We who cover markets have no self-respecting way to write, "The S&P rose 15 points and I have no clue why." So the dance goes on ...
#4 Posted by Financial Editor, CJR on Wed 12 Oct 2011 at 06:39 AM
Disclosing that you write for theStreet.com is akin to explaining to your girlfriend that you have genital herpes the morning after boning her over 11 times in every room of your house the previous night.
I mean Cramer....OMFG....surely you feel the need to shower at least three times a day?
How on EARTH do you explain to family and friends that you have anything whatsoever to do with that creature?
#5 Posted by Herman D. HugeLoad IV, CJR on Wed 12 Oct 2011 at 05:14 PM