Making Sense of Business and Financial News in an Investors Market
By David P Miller
I've been trading in the stock markets for over twenty-five years and have seen the markets react in many different ways to business and financial news through the years. Investors have a tough time trying to figure out the markets based upon reading business and financial news alone.
I've seen markets go up or down to the same types of news events. Financial markets react to interest rate changes, employment and jobless figures, industrial capacity, purchasing reports, manufacturing output, etc. While all of this information may be interesting from a business and financial point of view, what really matters to investors is the reaction in investor markets.
There are many programs that measure investor sentiment, which is another way of saying investor reaction. Getting a handle on this information makes it easier to make decisions. Technical Analysis of markets really takes a close look at the psychology of investors and helps to determine market direction. There are literally hundreds of different indicators that investors use to make sense of the markets, some with more success than others.
Basically, technical analysis of investor markets determines market movement by looking at existing historical information by performing different types of analysis on the market data. The underlying premise is that the data measures market sentiment and therefore discounts business and financial news in favor or investors market reaction.
There are various indicators that are used. Some of the more popular being Moving Averages, Trading Bands, Stochastics, Wilder's RSI, Wilder's DMI and High/Low/Close Charts. Other indicators include Japanese Candlesticks, Point and Figure Charts, Bollinger Bands and Trend Lines.
There are volumes of books written about technical analysis, some of which we have listed in our Investment Related Books section. Investors can gain a better understanding of the markets by using technical analysis and giving less weight in their decision making to business and financial news.