Last night I saw Wall Street: Money Never Sleeps, and I have to say, I liked it. My little sister thought is was really good. (She is not a market freak like me, and she said they did a good job telling the story.)
Oliver Stone did a good job portraying the ability to spark a rumor, and the consequence it can have in the market, in layman's terms. The level of communication is so fast, and interconnected, that inside information is no longer needed. Wanna make easier money, start a rumor. There are enough idiots out there to take action on them. (There are 3 kind of investors: innovators, imitators and idiots)
Look at AAPL. On Sept 28th (in the early morning trading hours) a rumor was circulating that AAPL's COO was going to go to HPQ. Any sane investor knows how utterly stupid, and unrealistic this concept is. Yet, the idiots, and maybe some imitators, sold and allowed the stock to decline to 275ish.
When there is this level of control with respect to rumors, there is no need for inside information.
Many think this deters people from being in the market. And I can obviously see why. Some shadey mother fucker just made a nice gain in less than 10minutes by telling lies. That annoys the hell out of me, and hope the fucker(s) gets caught.
But, it also provides an opportunity. And this is why it is important to know the fundamentals. To take advantage.
Rumors are a consequence of any market driven entity. The only way to fight it is to know the story better than anyone else. And educating yourself on a story is not that difficult to do.
To trade honestly, takes a lot of hard work. Risks can be drastically mitigated, but tough decisions still have to be made. For instance, take a look at Goldman Sach, from Thursday to Friday.
On Thursday, the chart of GS did not look good at all. It looked like shit. Along with the media and analysts pounding the hell out financials, especially the ones focused on capital markets due to trading volumes.
Here we have a scenario that discipline tells me (the honest trader) to sell. So as Friday comes about, the stock rallies. So much so, it approaches the downward sloping SMA. So I recouple losses, and sell. But the interesting aspect of Friday, was that the SMA resistance only lasted intraday. The stock closed above its resistance levels. And the sentiment of the chart is far different today.
Now it looks good enough for a pop to 151, maybe to the 155 level, pending overall market activity. (Cause all those traders who were short the name are now second guessing their thesis, and will cover their position on a solid open on Monday. Allowing for the juice to pop.)
My point is, trading is hard.
Nothing fundamentally changed from Thursday to Friday. The stock is still inexpensive, but the decision to buy/sell/hold (for a trader) had to be made. Many fuckers out there would rather bypass this difficult process, and put the energy in creating a rumor.