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U.S. / China Trade: Why the Media's Favorite Market "Catalyst" Misleads

Learn the actual driver of the stock market's trend

by Bob Stokes
Updated: May 30, 2019

My, oh, my!

For months on end, the financial press had linked the stock market's daily price action to the latest update in U.S. / China trade talks.

This May 23 New York Times headline is a representative sample:

Stocks Slide Over Worsening U.S.-China Trade Tensions

The trade news was also negative nine days earlier. On May 14, CNN had this headline:

US-China trade talks at a halt...

Yet, the Dow Industrials closed that day more than 200 points -- up.

Point being, to rely on trade news as a "predictor" of what the stock market will do is a tricky notion.

For example, at 4:26 a.m. ET on Nov. 27, CNBC ran this headline:

Dow and S&P 500 rise on hopes for a US-China trade truce

Yet, later that very same day (1:43 p.m.), CNBC had to report that:

Stocks fall as investors fear trade war

In other words, the U.S.-China trade conflict made the stock market rise, then fall -- even though nothing about the conflict had changed during the nine hours between those headlines.

This type of fast media switch-a-roo happens far more often than many investors realize.

The actual driver of stock market prices is investor psychology, which you can actually see in the Elliott wave patterns that unfold in stock market charts.

These wave patterns repeat themselves at every degree of trend. Hence, they are predictable.

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