I just found this cute overview of the relationship between fundamentals and
the DOW over at zerohedge:
GM chapter 11 = PRICED IN
125K+ jobs lost from GM chapter 11 = PRICED
IN
unemployment @ 9% = BETTER THAN EXPECTED
unemployment @ 10% = DOW
SOARS
unemployment @ 11% = GREEN SHOOT RALLY
unemployment @ 12% = ALREADY
FACTORED IN
unemployment = 35% = DOW DROPS 100 POINTS
housing price =1% =
RECESSION ENDING
housing collapses = GREEN SHOOT
Housing falls 20% =
STABILIZATION
Government spends 1 trillion of OUR dollars = STIMULUS
North
Korea fires nuke = RALLY
Israel bombs Iran = 30 MINUTE END OF DAY
RALLY
world explodes = ASIA RALLIES
PMI crashes = HUGE RALLY
No jobs
are created = RECESSION ALMOST OVER
U.S. debt overwhelming = TOO BUSY
RALLYING TO CARE
Consumer stops spending = RETAIL RALLY
Banks are
insolvent = SIGNS OF STABILIZATION
American auto industry BK = GOOD
THING
Banks pass scam stress tests = HUUUUUUUUGE RALLY
Banks “only need 75
billion = OUT OF THE WOODS
Banks pass a real stress test = NEVER WOULD
HAPPEN
Banks pay back tarp = LATE DAY SURGE
Banks can’t pay back TARP =
EARLY MORNING SURGE
12% mortgage delinquency = GOOD FOR STOCKS
Hundreds of
thousands of mortgages underwater = HOUSING BOTTOMED
Dollar rises =
RALLY
Dollar crashes = RALLY
Inflation = BULL MARKET
Deflation = BULL
MARKET CONTINUES
REFLATION = MASSIVE SHORT COVERING RALLY
Gold rises =
STOCKS RALLY
Gold falls STOCKS RALLY BIG
Banks’ fake earnings = SIGNS OF
STABILIZATION
CRE stabilizing= 1000 POINT RALLY
CRE CRASHING = STOCKS
SHAKE IT OFF TO RALLY
CONSUMER INSOVENT = CONSUMER IS SPENDING
OIL @ 50 =
BULL RALLY
OIL @ 60 = GREEN SHOOT
OIL @ 100 = IMPORTANT RECOVERY
SIGN
OIL @ 20 = TAX BREAK
As much as I would like to think that you can use fundamentals to predict the
market, it just goes to show you how difficult they are to use in reality. But
before you jump to conclusions and say “this is why we should use technical
analysis”, the real moral of this story is the DOW is quite illiquid at the
moment because most big funds are sitting on the sidelines.
