Too much of anything is often not good!

Do you consider yourself to be a smart investor/trader? Oversmart may be? How does one become smart anyway? by acquiring knowledge you say? Its correct. If one wants to outsmart others around him/herself, they have to gain edge over others and knowledge is surely one way of getting that. So, why am I asking all this? Often times we get knowledge by reading, listening or whatever source of information you follow. Now, coming to the point, today's market action after the release of job report would leave many of us who know what it means - simply puzzled! Right? Were we being oversmart in anticipating the market direction based on our knowledge of the reality? I mean shouldn't the markets be selling off on a not-so-good report? Shouldn't this be scary? But no, market gods decide otherwise and take this as an opportunity to buy. Really? These buyers must be seeing something that we are not you may say? Well may be. Or maybe not. Lets see how this works.

Currently, if its a bad news, then the hopes for QE2 go up and the market goes up. Then the market should go down on release of good news/data, correct? Wrong! Hope is the name of the game... QE2 is inevitable and the market wants to rally regardless. The bottomline is that the shorter-term market reaction is sometimes violent and sometimes slow and it often is misleading. Over the longer term though, it catches up with the reality. For example, there were many who pointed out the subprime issue in 2007, and most of 2008 but they kept loosing money if they bet against market at the first sign on subprime problem. It took time before market caught up with the fundamentals. Net, you cannot fight momentum, positive or negative. Momentum is key and its very important to know which way it is so that you pick that early on and ride to profits.