As a trained market technician (however not certified), the discussion of oil prices related to the recent Iran/US tit-a-tat is a source of great amusement. For example the WSJ Editorial Board pontificated that the “first Gulf War caused oil prices to nearly double in a few months.” Curious. Adherents to Ralph Nelson Elliott’s theory of markets had predicted that move, Gulf War or no. Elliott Wave International has extensively documented the utter disconnect between news and stock prices.
My entertainment was amplified as I looked at the aftermarket action of USO, the oil ETF. It seems that the WSJ Op-Ed was written in the early evening as the attack was underway. During those hours, USO did rise slightly less than 5% from the daily market close. But by the moment of this writing, it is down 1.4% from the closing price. It seems that something doesn’t add up.
I’ve been a victim of this phenomenon. A couple of years ago I took an “earnings trade” in Netflix. I thought I had properly divined the market. After the daily market closed, NFLX announced its earning. The good news was amazing. Not only did they earn more than the market analysts predicted, they earned more than their own bean counters predicted. Happy days are here again! But NFLX share price took a bath, and I got clobbered. On good news!
EWI’s magnificent film, History’s Hidden Engine, clearly demonstrates that a number of market elements closely track large social mood. And because of this, EWI’s companion institution, The Socionomist, notes that the 3-year stock market trend before the election is a very good predictor of the President’s re-election chances. It also predicts the chances of his removal via impeachment.
We can be even more critical of market pundits. On a daily basis we hear that “because of X, Y happened.” But those pundits refuse to participate in a challenge where they make predictions. It would actually be quite simple.
There are a lot of scheduled economic announcements. We can look at the Federal Reserve Open Market Committee’s regular statement that they will either raise, lower, or leave interest rates the same. The Labor Department’s “Non-Farm Payroll” announcement is also on the calendar.
Pundits would make a set of predictions and hand them to a neutral third party. What happens if the FOMC does any of the three possibilities. Ditto for Non-Farm Payroll. Predict the number of jobs. Then assess the market response if they get it right, there are more jobs, or fewer jobs than the prediction. After the data is released to the public, open the predictions. Post them on a public site. Keep going for a number of months.
Once this data is in hand, we will know what credence to give the TV swamis. After all, their record will be clear, and they can’t go backwards to “correct the record.” My guess is that they will all be shown to have less accuracy than darts thrown at the ticker tape. Like last night.