06/06/2023
How the Market Reacts to News
Bob Zoellner taught me a very important indicator about how the market reacts to news. If the market gets negative news and the market shrugs it off and it continues to go up, this is a bullish reaction because it means the market has already discounted the news. On the other hand, a sign of a fully priced market is one that reacts poorly to good news. In terms of stocks, some investors are puzzled when good news causes a decline in stock price. Investors should understand that this "good news" had already been priced into the issue. My favorite lesson that Bob Zoellner taught me is that when the stress gets so great that you think you might vomit, you should probably double your position, but only if you are then willing to use a tight stop loss on the entire position. - Marty Schwartz