The following is a fantastic quotes from page 181 to 187 and probably the most important lesson any investor has to understand to be able to understand the markets:
While most financial news writers explain market action by current events, there is seldom any worthwhile connection. Most days contain a plethora of both good and bad news, which is usually selectively scrutinized to come up with a plausible explanation for the movement of the market. In Nature's Law, Elliott commented on the value of news as follows:Another post will come to follow up on this.
At best, news is the tardy recognition of forces that have already been at work for some time and is startling only those unaware of the trend. The futility in relying on anyone's ability to interpret the value of any single news item in terms of the stock market has long been recognized by experienced and successful traders. No single news item or series of developments can be regarded as the underlying cause of any sustained trend. In fact, over a long period of time, the same events have had widely different effects because trend conditions were dissimilar.[...]
[...] In periods of increasing optimism, the market's apparent reaction to an item of news is often different from what it would have been if the market were in a downtrend. [...]
[...] It is almost certain that in fact people's emotional states and trends, as reflected by market prices, cause them to behave in ways that ultimately affect economics statistics, i.e., produce "news". To sum up our view, then, the market, for forecasting purposing, is the news.
[...] attempts to forecast the market without listening to the market itself are doomed to fail. If anything, the market is a far more reliable predictor of the economy than vice versa.
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