There are interesting when the Dow Jones was down almost 1.200 points on Monday, 5 February, and it is not the fact that the decline was the Dow's biggest decline in one-day history (from the side points, not percentages), but rather the response President Trump through his Twitter account: ' in the past, when the good news came out then the stock market will go up. But today, when the good news came out of the stock market thus dropped. This is a huge mistake! And we've got a lot of good news, the American economy is linked! '
And despite later appearing various positive and negative response over a tweet , but the logic of the question indeed makes sense: Why American stock market down kok instead when good news related to the low unemployment figures etc. out? Isn't it good news should be positive sentiment for the stock market?
But if you're experienced enough in the stock market, then you will grasp that this is not the first time going down when stock events out good news, or otherwise shares surged precisely when out bad news, but that's often the case since the first. The most recent example, in April-May 2017 then, coal stocks were down an average of 10 – 20%, thus after the Fragrant Energy (HRUM) dkk reported a rise in net profit which is quite significant in the financial report (LK) them to the I quarter of 2017.
But if you pay attention, it will also look to the fact that coal stocks have gone up a long way before the emitennya reported a rise in net profit. In the example, the HRUM's shares in September 2016 shares still at level 1.000, before rising rapidly until almost translucent 3.000 in early April 2017. So even though in May his HRUM back down to Muscovy duck in 2.000, but overall if counted from September 2016, then this HRUM, similarly to other coal shares, remained without significant rises.
What Is The Price In ' Theory '?
But the question back again: why would kok coal stocks have gone up first before the emitennya release of LK, and thus went down after the LK released? Well, in this case the author was about to introduce a term may not be found in the books text book about investing: stock Price In Theory. Please read this section well: is the price in is a situation where the price of a stock already is at a level that reflects the company's fundamental harmony with/and/or outstanding issues related companies such. In conjunction with the stock indices such as the Dow Jones and JCI, then price in circumstances where the index position is already reflected the economic fundamentals of the country, and also aligned with economic news (and political).
(Note: If the world trader of the stock, then the price in theory, though not exactly the same, is more or less the same as the term buy on rumors, sell on news!).
So kronologisnya like this. First, coal prices began to rise, and everyone can see it. Second, because the price of coal to rise, then it appears the hope aka expectations that issuers-issuers will obtain coal rising profit. When the ' hope ' is increasingly strengthened, then investors, especially those who realize that coal stocks valuation already avail cheap (in September 2016, there are many shares his PBV coal charge zero comma umpteen), will begin buying coal stocks even though the issuers concerned still registered a decline in profits or even a loss. As a result, coal stocks begin to rise. Third, the issuers are the LK which coal has finally released their performance indeed nice, but when it's coal stocks have gone up high to valuasinya not cheap anymore/already match with the latest, some even avail in already expensive. At this point some of the investors ' steal ' start buying stocks in coal prices down, when it's with the expectations that his future good LK and then reached the expectations/already ' in ' price, will consider for profit taking first. Because they realize that in order for the coal stocks could rise even higher, then it takes the new expectations again.
And when it's not there/haven't appeared again to the new expectations, investors went on sale. This then leads to a decrease in the stocks of coal in may, i.e. precisely when the issuers have already released their latest LK. But because the sale is simply those who buy lower price in dkk HRUM (while the new people get into the stock at the price of coal is over, they will not sale because its position is still nyangkut, and they will not cut loss because anyway in the performance of the issuers coal is good), then a decline that occurred not too deep, and not to restore coal stocks to levels before they begin to rally, September 2016.
The movement of the index of mining stocks in the last year. Note that the index significantly down mines in may 2017 (the red box), but some time later rise again
Well, so it could be inferred that the decline that occurred in coal stocks in may 2017 is a healthy correction, which is not caused by the coal company reported performance is bad, but it is precisely because the coal stocks the previous high to have gone up in price since the beginning of the match/sudah price in the latest fundamental conditions with the company. In contrast to the decline in stocks due to lingering problems fundamentally, ' healthy ' correction like this usually will not happen too long nor too deep, and is more of a ' short break before later starting the road again '. And it proved to be, coal stocks on this day is already higher than their highest position (before the corrected) in April 2017.
Why appear bad news when a stock/index stocks down?
So back to the decline in the Dow Jones: Why 5 last February the Dow down significant precisely when American economic data suggests the numbers good? Yes it is because the Dow has climbed much since the previous two years, when it was due onthe drive by the associated expectations return to economic conditions. So when the expectations are met, where the American economy is now more bagus-bagusnya, so instead it's time to get out first. However, because the sales are simply those who start shopping stock when the Dow two years ago is still at 18.000-an, then unless the incident a serious political economy, decline in the Dow would not be too big/not going to return again to as low as 18.000 such.
But Mr. Fast, as you discuss in the article last week, why when the Dow was down a total of 10.3%, news that later appeared in the media-the mainstream media is bad news related to inflation, rather than a question of ' price in '? Well, that's because to be able to understand that price or valuation of a stock already match/ price in already or not yet with fundamentalnya, then an investor must understand about fundamental analysis itself, and in particular understood the question of methods of value investing. And the problem, never mind the lay people, two people value investors who are both experienced though could have different opinions about whether A stock price up from 500 to 1.000 it already price in performance with the latest company fundamentals , or not?
For that reason, if for example the brokers and securities analysts receive inquiries from customers and journalists related to the fall of the Dow, and they then replied, ' Because valuations Apple emang udah dkk expensive Pack, so yes it should go down first ', then they will follow-up questions were shot: ' Know where if the Dow already expensive? ' ' How do I ngitungnya? ' ' So the Dow should be at the level of how?? ' (because, honestly, never mind in Indonesia, in developed countries such as the United though, very few investors who really analyze stocks pake fundamental analysis/rule value investing).
But if the brokers and analysts can find ' important events ' to explain the drop in the Dow, in this story a matter of inflation (though the story is actually mengada-ngada), then the question of inflation that's what later became the scapegoat, but at least it will be enough to make people say, ' Oh, so Dow down because it anyway! ' Whereas the Dow down Yes not because of inflation or any of that, but because the factor price in last (you can read more a matter of ' causes of discharge bad news every time a stock goes down ', in this article).
Anyway, so now you understand that, as the authors tell in last week's article, there are two causes for the decline of shares/stock index. The first is because the fundamental factor/decline the company's performance, and secondly because the factor price in this. Of course, to be able to distinguish the two then you should first understand the fundamental question of the telebih company, stock valuations, macroeconomic analysis as well as to industry/sectoral. But well, although admittedly make confused at first, but if it was used then it dont hard kok:) You can just read-read again just long articles on this blog.
Unless there is a significant event, for next week we will discuss one stock is nice and (still) cheap, whose performance in the Full Year 2017 just beyond expectation.