The stock market is fickle. The slightest news about the economy creates rapid swings from day to day. Key players interpret economic indicators to mean one thing or another and begin to act upon those opinions. People begin to panic when they see a few people buying or selling and follow the crowd. Often times this results in basic news about the economy to be blown out of proportion. Even when the news isn't surprising, when everyone already understands the state of the economy and the 'news' is just a report stating that what we thought existed in fact does exist, people overreact.
The ability to predict the market has less to do with understanding the economy and more to do with understanding the people in the marketplace. The ability to predict the actions and/or reactions of the people is what you are truly hedging as a participant. The market value of a company is not based on how well a company is doing, but how well a company is perceived to be doing.
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