Rationalizing todays market move

Pundits (be on Television or Newspaper) have a way to rationalize everything that happens. Every market move is due to some or the other news. When markets are bullish, all reasons are bullish in nature and even those that aren’t turned around to mean as such.

So, if the markets are up despite there being a bad IIP nos, its explained away as Investors / Traders betting on a Interest rate cut. If it falls, of course IIP no’s were the culprit. One day the markets rise is explained by what happened in China while the next day, China does not even matter since market action was due to the downgrade of ______ (Fill up the country of your choice).

People love rationalizing. Period. Every move has to be explained by some event or the other. So, yesterday’s move down in our markets were due to selling of shares by the Ex-Promoters of Infosys while for today’s move, we have China to blame.

The interesting thing about China is that, much of the world did not even know that there existed a stock exchange in Shanghai until it started rallying in recent weeks. Today’s one day fall in the market has in a way stuck a match for the others with markets around the world falling in sync. Incidentally, Shanghai Index is way way below its 2008 highs. The relative performance chart of Shanghai vs Sensex showcases how despite being up 38% up in this year, the performance is nowhere comparable to our performance.


As in the past, China will be quickly forgotten as soon as the markets have something else to bother with. Not too long ago was Cyprus / PIIGS a big problem for the market. Right now, most cannot even remember what the issue was about in the first place.

To conclude, I am reminded of Judy Croome’s quote “Today’s news is tomorrow’s history.”. The only way to win in the markets is by sticking with a plan. News neither makes nor breaks the markets. So, stop rationalizing šŸ™‚


About Prashanth

Have been a full time participant in the stock markets since 1996. Run a Yahoo Group where focus is exclusively on discussions of the Indian Markets using Technical Analysis as the tool (groups.yahoo.com/group/technical-investor)
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2 Responses to Rationalizing todays market move

  1. Venky says:

    Agree, but it is extremely difficult to ignore the noise and concentrate on your plan when things are falling apart.

    • Prashanth says:

      Let me put it this way. Real Estate in China is falling, even here, we hear regularly about how there is a surplus in apartments and prices shall fall. Does that force us to act and sell our houses?

      Compared to our investments in markets, our investment in our house is mutli fold higher. Yet, we do not get moved by such noise.

      Agree that over-riding noise is tough, but that is a key requirement to both surviving and thriving in the markets. And the only way is by having a plan of action. Without a plan, its more easy to get swayed since we always look back at worse case scenarios and wonder if this shall turn out to be one such.

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