Timing of Financial News
The stock market moves quickly. Stock prices change not only from day to day, but from minute to minute. When one particular stock attracts a lot of interest, the changes in price can be quite dramatic and exciting to watch. Timing is everything.
This is a problem for those whn believe in fundamental analysis. There is no instant fundamental information available, and financial statements are normally two or three months old by the time they are read. This situation should be thought of in light of an earlier observa-tion: The moment-to-moment changes in the market, movements in the indexes, and news or gossip have no long-term effect on the investment decisions you make today. Technical indicators and the immediate news affect the overall market in the moment, but fundamental analysis has great value for long-term investment decisions—and absolutely no excitement right now.
KEY POINT
Fundamental analysis is not very exciting, but it is dependable as a means for judging a company's growth potential It is easy to be distracted by gossip and rumor, but ultimately, long-term investing depends on a study of the fundamentals.
Published financial statements cannot be used for day-to-day deci-sions. Because the information is outdated, financial statements offer absolutely nothing of value to the speculator. The historical record might be of interest, but in truth._the speculator is far more interested in technical indicators: the movement of stock price, high and low levels compared to today's market value, the stock's most recent chart, its tendency to react (or overreact) to the market as a whole, and other such measures. These indicators are available every day and, with automation, even on an instantly updated basis. Thus, they appear to offer more insight and information to the investor. The speculator cannot afford to care about financial strength or stability, profits, quality of manage-ment, competitive position of the company, or other fundamental tests. Only one thing matters: the market price now and its potential for dramatic change in the immediate future.
The trap in using only technical indicators is that they are tied to indexes or visual trading patterns (charts and graphs), or they attempt to assess market value based on formulas tied to past price movement. In other words, if you really believe in the fundamentals, then such technical indicators are not reliable—they are only easily available.
KEY POINT
Mere availability of information does not make that information useful. Investors need to seek reliability rather than convenience.
It is a serious error to opt for market intelligence merely because it is easily available and up-to-date. Some technical indicators can provide value to you as a part of your overall selection and decisionmaking process, but using it alone makes no sense for selection of long-term investments.
