Review: Four Charts to Scare the Stock Market Bulls

There’s always some reason somebody believes the financial markets are about to collapse. We harp on this quite a bit, but unfortunately the financial media give us a lot of opportunities.

We as a species are really good at pattern recognition – especially recognizing patterns that represent a threat. From an evolutionary perspective, this makes a lot of sense. When you’re worried about being eaten, the cost of a false positive is a lot lower than the cost of a false negative.

But the fact that we recognize a pattern doesn’t necessarily mean that pattern will repeat. We could go back and identify patterns in the data before every significant market decline. But that likely wouldn’t actually tell us much about what will happen in the future.

Market movement is based off of new information, and the markets almost instantaneously reflect that new information. The types of patterns this article is talking about are the things that traders and speculators constantly obsess over.

The markets know what the VIX is doing. They know what Chinese manufacturing is doing. None of this is a surprise at this point, so all of this information is already priced into the markets. What matters for future returns is what happens next. If tomorrow’s news is better than expected, prices will go up. If tomorrow’s news is worse than expected, prices will go down. It’s the same as any other point in time.

The financial services industry and the financial media know that sensationalism helps them make money, but it doesn’t help you make money. The key to a good investment experience is not following every dip and dive that analysts predict for the markets. The key to a good investment experience is to stay disciplined and focus on the long term.

To see this in action, take a look at our ebook “Investing Through the Decades.”


McLean Asset Management Corporation (MAMC) is a SEC registered investment adviser. The content of this publication reflects the views of McLean Asset Management Corporation (MAMC) and sources deemed by MAMC to be reliable. There are many different interpretations of investment statistics and many different ideas about how to best use them. Past performance is not indicative of future performance. The information provided is for educational purposes only and does not constitute an offer to sell or a solicitation of an offer to buy or sell securities. There are no warranties, expressed or implied, as to accuracy, completeness, or results obtained from any information on this presentation. Indexes are not available for direct investment. All investments involve risk.

The information throughout this presentation, whether stock quotes, charts, articles, or any other statements regarding market or other financial information, is obtained from sources which we, and our suppliers believe to be reliable, but we do not warrant or guarantee the timeliness or accuracy of this information. Neither our information providers nor we shall be liable for any errors or inaccuracies, regardless of cause, or the lack of timeliness of, or for any delay or interruption in the transmission there of to the user. MAMC only transacts business in states where it is properly registered, or excluded or exempted from registration requirements. It does not provide tax, legal, or accounting advice. The information contained in this presentation does not take into account your particular investment objectives, financial situation, or needs, and you should, in considering this material, discuss your individual circumstances with professionals in those areas before making any decisions.