Presidential elections have always been a part of the wavelike advances and retreats of the broad market and understanding how they affect the long-term ebb and flow of aggregate stock prices are an essential component of successful investing. The current period offers an excellent opportunity to compare present cycles with past trends. Many historians thought that equity markets would continue to flourish in 1999 as there hasn’t been a down year in the third year of a presidential term since the war-torn era of 1939. The only severe loss in a pre-presidential election year (since 1914) occurred just after the Depression in 1931.

The four-year presidential term has perpetuated a well-defined stock market cycle. Most bearish trends occur in the first or second year after elections. Then the market improves because each new administration usually does everything in its power to boost the economy so that voters are in a positive mood for the next election. History suggests the winning streak will continue and that the market in pre-presidential election 1999 will gain ground before years end. Prospects improve considerably when the market has experienced a correction, or has spent a long period moving sideways, as it has in the last few months. It’s no small coincidence that the last two years (the pre-election year and election year) of the 42 administrations since 1832 produced a total net market gain of over 700%, well above the 235% gain for the first two years of these administrations. The time spent in office also coincides with many significant historical events. Wars, recessions and bear markets tend to start or occur in the first half of the term while prosperous times and bull markets usually follow in the latter half.

The complex facets of our economy that determine the overall financial health of the nation and key events that affect our country are anticipated by the emotion of the market. Any study that compares these historical events with the movement of the major indices will demonstrate how war, recession, and electing a president can influence the current cycle. These actions all have a profound impact on the economy and the stock market. It is important to become familiar with historically repetitive rhythms in the market and apply this knowledge as a practical part of your long-term investment strategy.

To be a successful investor, it is necessary to have a fundamental understanding of the philosophy that drives the stock market. The mass psychology of human nature is the biggest single factor you must comprehend if you expect to trade profitably on a consistent basis. This emotional and psychological ingredient has absolutely nothing to do with the state of the economy, but it does have an overwhelming affect on the movement of the market.

The first unwritten rule is that rumors are the prime movers of the stock market. It’s amazing how quickly speculation of upcoming events can change the character of the current trend. In recent weeks, just the mention of inflation causes investors to rush for the exits in order to dump their holdings. This type of activity will often precipitate a general market decline long before the economy actually changes into that state or condition. The market anticipates the movement of the economy and shows us in advance what we can expect with regard to corporate health, unemployment, interest rates and other financial trends. It is also said that a crash in the market is foretold by events that are mostly psychological, not economic.

When investors and analysts begin to discuss bearish trends, the market generally reacts negatively because the public believes it is destined for a downturn. In contrast, when a major financial report is rumored as favorable, the market erupts far in advance of the actual announcement.

The most important underlying factor is the power of human nature on the movement of stocks and other investment vehicles. When you understand the changes produced by emotional factors, you can begin to discern the broader, more technical movements in the market. The key is to avoid the impulse to buy at the height of the rally just because the market is up and everyone is talking about their successes. Learn to trade on your own terms, not the market’s.

To be a successful investor, it is necessary to have a fundamental understanding of the philosophy that drives the stock market. The mass psychology of human nature is the biggest single factor you must comprehend if you expect to trade profitably on a consistent basis. This emotional and psychological ingredient has absolutely nothing to do with the state of the economy, but it does have an overwhelming affect on the movement of the market.

The first unwritten rule is that rumors are the prime movers of the stock market. It’s amazing how quickly speculation of upcoming events can change the character of the current trend. In recent weeks, just the mention of inflation causes investors to rush for the exits in order to dump their holdings. This type of activity will often precipitate a general market decline long before the economy actually changes into that state or condition. The market anticipates the movement of the economy and shows us in advance what we can expect with regard to corporate health, unemployment, interest rates and other financial trends. It is also said that a crash in the market is foretold by events that are mostly psychological, not economic.

When investors and analysts begin to discuss bearish trends, the market generally reacts negatively because the public believes it is destined for a downturn. In contrast, when a major financial report is rumored as favorable, the market erupts far in advance of the actual announcement.

The most important underlying factor is the power of human nature on the movement of stocks and other investment vehicles. When you understand the changes produced by emotional factors, you can begin to discern the broader, more technical movements in the market. The key is to avoid the impulse to buy at the height of the rally just because the market is up and everyone is talking about their successes. Learn to trade on your own terms, not the market’s.

Technical analysis is a method of stock market research using indicators, charts, and computer programs to track price trends of stocks, bonds, commodities, and market indexes. A technician understands the fundamental values of securities but focuses on the historical behavior of the market, industry groups and individual stocks. The goal is to use their price movements, trends, and patterns to forecast future direction and changes in character. Most of this analysis is based on the fact that the values of stocks reflect what people think they are worth, not what they are really worth.

Technical Indicators are used to generate buy or sell signals when specific buy or sell parameters are met. Cycle analysis; historically repetitive rhythms in price action, can also be helpful in initiating technical trades. The stock market historically moves in identifiable cycles. To be a successful investor, you must be able to determine the current phase of activity. Historical bottoms or cyclic lows are the most common signals that analysts attempt to uncover. These downside support areas are more reliable and take longer to develop than the cyclic highs. Using a long-term, monthly chart of the DOW, it is relatively easy to spot the four-year rhythm. The most recent bottoms occurred in 1990, 1994 & 1998.

In any type of long-term technical analysis, it is important to understand that, market cycles usually precede economic cycles. The many facets of our economy that determine the overall financial health of the nation are anticipated by the emotion of the market. Any study that compares key historical events with the movement of a major index will demonstrate how war, recession, or a presidential election can influence the current cycle.

It is important to become familiar with the common investment indicators used to determine the overall movement of the market and apply this knowledge as a practical part of your trading strategy. Once you understand the basic terms, try to start out with common indicators like stochastics, moving averages and relative strength. There are hundreds of other systems and formulas but these have been around for years and they work very well for beginners. After you are comfortable with your new tools, practice trading with the indicators you are using until your portfolio is profitable on a regular basis.

Technical analysis is a method of stock market research using indicators, charts, and computer programs to track price trends of stocks, bonds, commodities, and market indexes. A technician understands the fundamental values of securities but focuses on the historical behavior of the market, industry groups and individual stocks. The goal is to use their price movements, trends, and patterns to forecast future direction and changes in character. Most of this analysis is based on the fact that the values of stocks reflect what people think they are worth, not what they are really worth.

Technical Indicators are used to generate buy or sell signals when specific buy or sell parameters are met. Cycle analysis; historically repetitive rhythms in price action, can also be helpful in initiating technical trades. The stock market historically moves in identifiable cycles. To be a successful investor, you must be able to determine the current phase of activity. Historical bottoms or cyclic lows are the most common signals that analysts attempt to uncover. These downside support areas are more reliable and take longer to develop than the cyclic highs. Using a long-term, monthly chart of the DOW, it is relatively easy to spot the four-year rhythm. The most recent bottoms occurred in 1990, 1994 & 1998.

In any type of long-term technical analysis, it is important to understand that, market cycles usually precede economic cycles. The many facets of our economy that determine the overall financial health of the nation are anticipated by the emotion of the market. Any study that compares key historical events with the movement of a major index will demonstrate how war, recession, or a presidential election can influence the current cycle.

It is important to become familiar with the common investment indicators used to determine the overall movement of the market and apply this knowledge as a practical part of your trading strategy. Once you understand the basic terms, try to start out with common indicators like stochastics, moving averages and relative strength. There are hundreds of other systems and formulas but these have been around for years and they work very well for beginners. After you are comfortable with your new tools, practice trading with the indicators you are using until your portfolio is profitable on a regular basis.