STREET DOGS

ALL news is filtered through the prevailing market sentiment, and people specifically, and the Street in general, are often short-sighted and slow to change in the face of new news that threatens a fashionable world view. Often market prices lag events by as long as it takes for sentiment to shift to reflect the new realities. Sometimes this takes days, but other times the shifts drag out for weeks or longer. If the breaking news flies in the face of the prevailing bullishness or bearishness, it can take some time for the markets to digest the new fundamentals and the prices to move accordingly. — Adam Hamilton, Zeal, Speculation and Investment

The best trades are the ones in which you have all three things going for you: fundamentals, technicals, and market tone. First, the fundamentals should suggest that there is an imbalance of supply and demand, which could result in a major move. Second, the chart must show that the market is moving in the direction that the fundamentals suggest. Third, when news comes out, the market should act in a way that reflects the right psychological tone. For example, a bull market should shrug off bearish news and respond vigorously to bullish news. — Michael Marcus, Market Wizards

An entire body of economic theory called behavioural finance has emerged to explain the fact that prices appear to move about largely in response to common misjudgments about the market rather than to accurate, instantaneous adjustments to new information. This results in continuous over- or undershooting of what might be thought as equilibrium fair value. This can happen for a very short or a very long period, and for great distances. — John Summa, Trading Against The Crowd Michel Pireu — e-mail pireum@streetdogs.co.za