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.
(Ed Note” Brief comments on Gold, Stocks and Oil from Today’s VR Gold Letter and VR Trader.
GOLD – The Annual Forecast Model correctly predicted a high point for Gold in the
current time frame, but the unanswered question is whether the September 17
high at 1025.10 was the fulfillment of that forecast.
STOCKS – Bearish sentiment grows as we enter October. In truth technicals topped out in September, but I originally lightened up ahead of Rosh Hashana on September 16 anticipating a retracement….
OIL – fell Friday on the weak employment report, but also on news that Russia is producing record amounts of oil. Crude oil settled down 0.87 at 69.95. Russia produced more than 10 million barrels per day of crude oil in September, setting a new monthly record, Reuters reported Friday, citing data from the Energy Ministry in Moscow. Russian production rose 0.4% to 10.01 million barrels per day in September from the 9.97 million barrels per day produced in August, the report said. In late August, state-controlled oil giant Rosneft started commercial production of crude oil at the Vankor field in the Arctic, helping boost Russian oil production in September, according to the report.
Marks VRTrader Silver Newletter covers Stock, TSE Stocks, Bonds, Gold, Base Metals, Uranium, Oil and the US Dollar.
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Marks VRTrader Silver Newletter covers Stock, TSE Stocks, Bonds, Gold, Base Metals, Uranium, Oil and the US Dollar.
More kudos – Mark Leibovit was named the #1 Intermediate Market Timer for the 10 year period ending in 2007; the #1 Intermediate Market Timer for the 3 year period ending in 2007; the #1 Intermediate Market Timer for the 8 year period ending in 2007; and the #8 Intermediate Market Timer for the 5 year period ending in 2007. NO OTHER ANALYST SURVEYED APPEARED IN ALL FOUR CATEGORIES FOR INTERMEDIATE MARKET TIMING AS PUBLISHED IN TIMER DIGEST JANUARY 28, 2008!
For a trial Subscription of The VR Silver Newsletter covering Stocks, Bonds, Gold, US Dollar, Oil CLICK HERE