Yesterday’s price action in the broad market, where stocks sold off sharply in the first half of the day, then reversed sharply higher in the afternoon, provides an excellent case for why we ignore the popular news media outlets. Early in the session, the “talking heads” were clamoring that the market was sinking due to “the Supreme Court’s decision on health care reform.” However, by the closing bell, the market had staged an impressive bullish reversal. Was this reversal also a result of the Supreme Court’s decision on health care reform? News doesn’t drive the market, the market drives the news. The news media merely observe what happens in the market, and then create a hindsight story in an attempt to provide an explanation. Why does there always need to be an explanation? That’s why we just follow the tape. Price action and volume tell us everything we need to know about what’s happening in the market.
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