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My Head is Going to Explode!

Author: Bob Lang (info)
Website: http://trade-mentor.com
Posted: August 24th, 2007 at 11:59 am EST
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In this turbulent time in the markets, it’s appropriate to talk about how we get our information and why it is so critical. Moreso how much information is really needed and whether too much puts us on overload. The speed of the markets must be dealt with constantly, but the speed of information must also be managed.

Hyperspeed…the markets have moved recently into this high gear. It’s been tough to catch up to the markets…whipsaws are evident (just look at the charts for the last month and you’ll see what I mean). The Fed has also been thrown in as a wildcard…the handicapping has just begun about anticipated rate cuts…not just how many, but how soon. How do we manage this difficult trading environment? The internet has been a great source of obtaining information and data. The Fed has been riding on data for forecasting its moves. But there is something called information overload, or analysis paralysis. This where too much data leads to inaction and distress as signals are constantly questioned. Are we looking at too much stuff, and do we need to turn down the volume of the noise?

Certainly the subprime issue, credit crunch and the economy are front page news. Nothing sells media better than doom and gloom…we’ve seen this recently on the cover of major publications (in Business Week, the end the housing market, etc). As a contrarian, there is no better time to be buyer as when the ’stuff’ hits the fan on the cover of publications. But does it really do us much good to constantly hear this chatter? Further, does this help us make a trade or an investment? Likely not, but it certainly could cause a selling panic, where bottoms are eventually made.

Our eyes and ears trigger reaction, whether emotional or otherwise. We hear bad news about the mortgage markets, we see gas prices rise at the pump…it all comes to a boil. What should we do? Pay attention to the meaningful data, not everything that the media presents.

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