Why Good News Crashes Markets
"But the news wasn't that bad, why is the market falling??"
When news or economic data hits the wire, markets move. Many traders are left scratching their heads, trying to come up with an explanation for why the market tanks on good news or rallies on bad news.
Don't waste your time.
It turns out, news is usually just a catalyst that allows momentum traders to profit off of a position they've already established, or lays the groundwork for their next trade.
As an example, take the overnight session preceding this morning's PPI print.
First, size traders accumulated (bought) under VWAP. Then, they drove the price up around 12am, and proceeded to distribute (sell) for a profit above VWAP.
Look at where the majority of volume was transacted, the VPOC. When this moves above VWAP, it tells you distribution may be done.
What happens next?
Size traders have made their money for the night, and no longer provide a bid. As soon as news or data comes out, they allow price to fall and may even sell into it.
And the cycle starts over again, now at an even better (lower) price.
Understanding this has helped me immensely; I sincerely hope it helps you too. Questions? Hit me up in the comments.
When news or economic data hits the wire, markets move. Many traders are left scratching their heads, trying to come up with an explanation for why the market tanks on good news or rallies on bad news.
Don't waste your time.
It turns out, news is usually just a catalyst that allows momentum traders to profit off of a position they've already established, or lays the groundwork for their next trade.
As an example, take the overnight session preceding this morning's PPI print.
First, size traders accumulated (bought) under VWAP. Then, they drove the price up around 12am, and proceeded to distribute (sell) for a profit above VWAP.
Look at where the majority of volume was transacted, the VPOC. When this moves above VWAP, it tells you distribution may be done.
What happens next?
Size traders have made their money for the night, and no longer provide a bid. As soon as news or data comes out, they allow price to fall and may even sell into it.
And the cycle starts over again, now at an even better (lower) price.
Understanding this has helped me immensely; I sincerely hope it helps you too. Questions? Hit me up in the comments.
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