S&P 500: Is Rally to 4800 Already Underway?
As we look back upon another interesting week in the market, there are a few standout matters I would like to point out.
To begin with, I saw the following quote from an interview with well-known economist Austan Goolsbee:
“The timing of the selloff has been something of a “puzzle” given there was no major change in the Fed’s latest projections.”
Mr. Goolsbee’s quote evidenced his ignorance of certain market dynamics. First, this selloff was not at all a “puzzle,” as the setup for it was developing weeks ago, as I have outlined in public articles.
But, you will not be able to identify these types of movements based on traditional economics. As Benoit Mandelbrot outright stated, one cannot reasonably apply an economic model to the financial markets:
“From the availability of the multifractal alternative, it follows that, today, economics and finance must be sharply distinguished”
Second, the Fed does not control the market as many seem to believe. If it were true, then the S&P 500 would not have been rallying to 4607 over this last year. In fact, that rally took Mr. Goolsbee and most other economists by surprise as well.
As I have often said, while news can act as a catalyst, the substance of the news is not really material to the direction of the market move.
While many market watchers superficially believe that the substance of a news announcement determines the direction of a market move, they often ignore the many times the market moves in the opposite direction of expectations. And, here, Mr. Goolsbee is proving our point.
To take this one step further, on September 18, I published an article wherein I noted the following:
“Moreover, should we see that downside follow through in the set up I am outlining, then it
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