It is said that media coverages could somehow portend the flows and ebbs of the financial markets. The reason for this is that media tends to highlight on the most dominant trend, or the extremes of public sentiment.
For instance, in the past, major market inflection points have been 'captured' by the so-called "magazine cover indicator".
As wikipedia.org defines,
``The Magazine cover indicator is a somewhat irreverent economic indicator, though sometimes taken seriously by technical analysts, which says that the cover story on the major business magazines, particularly BusinessWeek, Forbes and Fortune in the United States is often a contrary indicator.
``A famous example is a 1979 cover of BusinessWeek titled "The Death of Equities". The '70s had been a generally bad decade for the stock market and at the time the article was written the Dow Jones Industrial Average was at 800. However, 1979 roughly marked a turning point, and stocks went on to enjoy a bull market for the better part of two decades. Even after the financial crisis of 2007–2010, stocks remain far above their 1979 levels. Using the Magazine Cover Indicator, Business Week's projection that equities were dead should have been a buy signal. By the time an idea has had time to make its way to the business press, particularly a trading idea, then the idea has likely run its course. Similarly, good news on a cover can be taken as an ill omen. As Paul Krugman has joked "Whom the Gods would destroy, they first put on the cover of Business Week.""
Has the recent upbeatness of markets as revealed by this magazine cover forebode an upcoming reversal?
picture courtesy of The Economist
I am not sure about the consistency or infallibility of this indicator though.
What has been framed has been the coincidences which has exhibited "the right timing" between magazine covers and market inflection points in the past.
What has not been shown has been the success ratio or the statistical 'batting averages' between the general incidences of sentiment revealing magazine covers and market inflection points.
Picking a point or two can be "selective perception" to enforce a bias, rather than applying objective analysis.
Although based on the behavioral framework, there could be some support for this; as mentioned above, the dominant sentiment could mean "overconfidence" or recklessness or deeply entrenched view from the prevailing trend, which is common during bubble tops.
Next, I find another spook story from Business Insider.
It's about the attempt to connect market performance with the upcoming sequel of the 1987 movie-Wall Street II.
This from the Business Insider,
``Some have wondered whether the forthcoming release of Wall Street II movie by Oliver Stone portends a market crash, considering that the last Wall Street was released right before the crash of 1987.
``Actually, this line of reasoning understates the case.
``There was actually another movie called Wall Street that came out in 1929. Of course, the market collapsed that year, too."
Again, correlation doesn't imply causation. It doesn't mean that "Wall Street" type movies would automatically result to another market crash from which the authors tries to imply. It's more representative of the their bias than of a logical argued conclusion.
Nevertheless, given the market's overbought conditions, a retrenchment is likely in the cards.
For instance, in the past, major market inflection points have been 'captured' by the so-called "magazine cover indicator".
As wikipedia.org defines,
``The Magazine cover indicator is a somewhat irreverent economic indicator, though sometimes taken seriously by technical analysts, which says that the cover story on the major business magazines, particularly BusinessWeek, Forbes and Fortune in the United States is often a contrary indicator.
``A famous example is a 1979 cover of BusinessWeek titled "The Death of Equities". The '70s had been a generally bad decade for the stock market and at the time the article was written the Dow Jones Industrial Average was at 800. However, 1979 roughly marked a turning point, and stocks went on to enjoy a bull market for the better part of two decades. Even after the financial crisis of 2007–2010, stocks remain far above their 1979 levels. Using the Magazine Cover Indicator, Business Week's projection that equities were dead should have been a buy signal. By the time an idea has had time to make its way to the business press, particularly a trading idea, then the idea has likely run its course. Similarly, good news on a cover can be taken as an ill omen. As Paul Krugman has joked "Whom the Gods would destroy, they first put on the cover of Business Week.""
Has the recent upbeatness of markets as revealed by this magazine cover forebode an upcoming reversal?
picture courtesy of The EconomistI am not sure about the consistency or infallibility of this indicator though.
What has been framed has been the coincidences which has exhibited "the right timing" between magazine covers and market inflection points in the past.
What has not been shown has been the success ratio or the statistical 'batting averages' between the general incidences of sentiment revealing magazine covers and market inflection points.
Picking a point or two can be "selective perception" to enforce a bias, rather than applying objective analysis.
Although based on the behavioral framework, there could be some support for this; as mentioned above, the dominant sentiment could mean "overconfidence" or recklessness or deeply entrenched view from the prevailing trend, which is common during bubble tops.
Next, I find another spook story from Business Insider.
It's about the attempt to connect market performance with the upcoming sequel of the 1987 movie-Wall Street II.
This from the Business Insider,
``Some have wondered whether the forthcoming release of Wall Street II movie by Oliver Stone portends a market crash, considering that the last Wall Street was released right before the crash of 1987.
``Actually, this line of reasoning understates the case.
``There was actually another movie called Wall Street that came out in 1929. Of course, the market collapsed that year, too."
Again, correlation doesn't imply causation. It doesn't mean that "Wall Street" type movies would automatically result to another market crash from which the authors tries to imply. It's more representative of the their bias than of a logical argued conclusion.
Nevertheless, given the market's overbought conditions, a retrenchment is likely in the cards.
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