What makes a market move?

The simple answer is PEOPLE – Thousands of PEOPLE, ALL investing for very different reasons and investing based on their BELIEFS of where the market is heading.  Some are very short-term based investors others medium term and others long-term. They might ALL buy the stock/market on the exact same day for a variety of different personal reasons.

There’s many different views on the markets about what drives them, as a trader/investor it is vital that you have a solid belief as that will help your trading/investing.

The simple fact is that markets are driven by supply and demand factors

Sideways moving markets in a range (you can’t predict these ranges) means that either traders/investors are either distributing stocks or accumulating them – If Distributing then prices should fall and If accumulating stocks then prices should rise – (I do need to expand on this at some stage as it’s not quite that simple.  Keep an eye out for a blog post at some stage)

I have my own personal belief that the markets are influenced by new generations of people coming into the markets every 20-25 years,  unaware of the historical nature of the markets, all they want to do is make money and this helps to create booms.  I also think that the markets form cycles over the long / medium & short-term which are generated by these new generations.  I also think that large fund managers can manipulate markets and the news to their advantage but that they also herd like most investors – simply because they are human beings too.  The stock market has a natural inclination to rise, over the past 200 years it has risen, that in itself is a massive edge and it helps to explain that during a bull market why any fool can make money! But above all I’m fully aware that the market can, will and does do whatever it wants, whenever it wants.

Here’s some of the common theories why markets move:

If you read, learn and understand these theories then you will have straight away more knowledge of how the markets might work that the average trader/investor – to me that’s another edge!

Please note that I use the above links only as a learning aid.  I read, assess and then form my own opinion based upon my own interpretation of the evidence – I suggest you do the same for yourself.

Here’s more detail on The Elliott Wave Principle by Elliott Wave International.  I’ve spent the past 3 years learning and studying Elliott Wave and although not perfect I always look for wave counts on charts to see if anything jumps out.  Click the link above to learn more.

Many people think that Earnings move markets – this free report dispels that myth! Click the link below to access

Earnings: Stock Market’s Brightest False Beacon “Earnings estimators are too pessimistic at bottoms and too optimistic at tops,” explains EWI’s president Robert Prechter Elliott Wave International

Can the Fed and Economists Forecast the Future? See This Startling Chart.
Elliott Wave Financial Forecast Editors Kendall and Hochberg on economists, the Fed and forecasting June 27, 2011  – By Elliott Wave International

Business Talk Radio host Gabriel Wisdom recently spoke with Pete Kendall, Co-Editor of EWI’s Elliott Wave Financial Forecast. Their discussion included a crucial but rarely asked question about economists and the Federal Reserve. Here’s the relevant excerpt:

Gabriel Wisdom: “Ben Bernanke, the chairman of the Federal Reserve, says the economy is slowing but there’s faster growth ahead. Is he wrong?”

Pete Kendall: “Economists are extrapolationists. They tend to look at what’s happening in the economy and extrapolate that forward. So here we have a situation where not just Bernanke but economists in general are looking at… what they call the ‘soft patch’ and somehow contorting that into growth later in the year.

Pete’s startling reply flatly contradicts conventional wisdom. Most people believe that the Fed really is able to anticipate the economic future. After all, they’re the most “qualified.” But what do the facts say?

Pete’s Elliott Wave Financial Forecast Co-Editor Steve Hochberg recently included this eye-opening chart (from Societe Generale Equity Research) in his new subscriber-exclusive video, “Buy and Hold, or Sell and Fold: Where Are The Markets Headed in 2011?

Analysts Lag Reality. From 'Buy and Hold, or Sell and Fold: Where Are the Markets Headed in 2011?'

The red line in the chart is the S&P earnings, and the black line shows economists’ forecasts relative to those earnings. Here’s what James Montier, head of equity research for Societe Generale, said about it:

“The chart makes it transparently obvious that analysts lag reality. They only change their minds when there is irrefutable proof they were wrong, and then only change their minds very slowly.” (emphasis added)

That comment is spot-on. In 2002-2003, as you can see, earnings turned up despite economists’ forecasts for earning declines. It took them a while to “turn the ship around” and play catch-up with the trend.

Yet in 2007-2008, earnings turned down — despite the forecast by economists for continued increases. The devastating truth is that earnings did more than fall in the first quarter of 2008: they had their first negative quarter in the history of the S&P. As Steve said in his subscriber video, “Economists were wrong to a record degree” — and investors felt the pain.

So what’s the point? Economists do extrapolate the trend. That approach works fine, until it doesn’t­ — and you’re on the hook.

Elliott wave analysis never extrapolates trends — it anticipates them. The Wave Principle recognizes that markets must rise and fall — and that they unfold according to changes in investor psychology, in a way that is patterned and recognizable.

Most people believe that the Fed really is able to anticipate the economic future. Now you know the facts. Uncover other important myths and misconceptions about the economy and the markets by reading Market Myths Exposed.

EWI’s free Market Myths Exposed 33-page eBook takes the 10 most dangerous investment myths head on and exposes the truth about each in a way every investor can understand. Download your free copy now.

This article was syndicated by Elliott Wave International and was originally published under the headline Can the Fed and Economists Forecast the Future? See This Startling Chart.. EWI is the world’s largest market forecasting firm. Its staff of full-time analysts led by Chartered Market Technician Robert Prechter provides 24-hour-a-day market analysis to institutional and private investors around the world.

Now here’s a real gem – a 60 min documentary on stock market behaviour.  This is a must watch video that details the links between wars, pop music, fashion and more to the stock market!  Watch history unfold and see how events track the stock market – click on the banner below

I’ve teamed up with Top Dog Trading, they’ve produced 3 enlightening reports for only $18!  These are great reading to understand what drives markets and understanding the “Thinking” the market does.  If you think that the markets out to get you and had your stops run – you need to read these reports.  Click on the image below to access
Trading Tricks

Also have you even considered the TYPE of market you are looking to trade/Invest into?  If not here’s a short video from Dr. Van Tharp to point out some considerations:

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