Schwager also suggests we look out for those times when a development that would otherwise confirm the present trend inspires a market move opposite of what the setup, or the prevailing trend, would’ve otherwise suggested. Which is a phenomenon we’re all too familiar with and, thus, sensitive to. The market’s recent propensity to rally on good news and shrug off the bad speaks to the strength of the underlying fundamentals, and confirms our macro view. That said, we absolutely anticipate that while this bullish setup remains there will be days, weeks and months where “bad” news indeed inspires a break in the bullish action; which, frankly, would be a healthy pause we long-term investors should welcome:
….the key point to keep in mind is that fundamental analysis is primarily a tool for forecasting intermediate or long-term price swings and should not be used as a timing indicator. The only exception to this basic premise is that a counter-to-anticipated market response to fundamental information could be viewed as a contrarian trading signal (e.g., a bullish fundamental development would have bearish near-term implications if it failed to elicit the anticipated positive price response).”