Market and mass psychology, when to buy and when to sell

"If you are unsure whether or not we are in a bull market, this is indicative that we are in a bear market rally," said Mark Konyn this week, chief investment RCM Asset Management at the Wall Street Journal.

If anyone had made such a question in the roof of the rally in early June, the market participants have said "is a bull market" (a growing market), both from an economic standpoint as a coach and that the news had begun to be more promising since March, after withstanding a fierce low and deep in 2008 that devoured half the value of the indexes in the Stock Exchange of United States. And the bad news began to be taken with more optimism in that period, as is often given in upward trends: reinforce the good news and minimizing the bad.
During rallies upward or bubbles, is an atmosphere of optimism stock sometimes without cause or reason that a company like Microsoft could say that its sales dropped to zero and go up the action quickly.
Prior to the rise that began in March this year, the market reacted strongly and sobrevendido too much like someone who pulls a rubber band, and at some point that the elastic strain recovers correcting initial positions. It is very difficult to determine the order of an overbought or oversold in the securities markets. A number of tools can help estimate possible change of trend, but we must bear in mind that the market may be overbought or sobrevendido continue for much longer, and we melt jugándole against any of these conditions. This is due to certain causes.

The psychology of mass denial goes from the floor of the excessive market optimism on the roof.
When the market goes up, the press begins to tell us the causes of this rise with great detail and begin to project scenarios increasingly positive, where the prevailing optimism makes the bad news, which previously were able to knock down the markets, go undetected or almost, without causing the devastating effects of the past during the bearish trend. When you put that optimism in the market, in which the participants believe that they make cows fly roses, is expanding and we are all convinced that premise, when we all bought shares and we do not have anyone who wants to get rid of their values (in a figurative sense) is that the market is ready to reverse trend and begin to fall.
The same happens in periods of low. When the market falls, and the thresholds are low and increasing pessimism becomes increasingly emerging view of mass media and analysts to warn us and for the cheese that low, the reasons for the deepening and projections continuing catastrophic downward. Until the negative sentiment pervades all of us, terror is started, no one buying, all sold at market rent and the market is again ready to reverse its downward trend to bullish.
To change the market for unambiguously bearish to bullish trend, it must be purchased with all investors expect more optimistic they will go up to a bearish bullish, is because the market is sold and the investor mood was strongly negative.
And one of the first signs that the trend is exhausted is the interpretation of the news by the market participants. As the good news are not accepted with the same optimism that during the upward trend and bad news are carefully listened to the contrary by the market, because the trend is reversed and starts downward, as we pointed out in "Wall Street: End of rally? "

And in this mass psychology is based on technical analysis, which is neither more nor less than the interpretation and the study of price and volume charts in the financial markets. The basis of this analysis is to discover the difference in power between the bulls (bull) and bears (bassist) and follow this difference with our savings. The market is like an opinion poll, which will reflect the will of its individual participants at the aggregate level that the market will move towards one direction or another.

"The price is a psychological event, a momentary view of balance between upside and downside. The prices are created by masses of traders, buyers and sellers and undecided, "says Alexander Elder in his book Trading for a Living.
And the volume graph the acceptance or lack of acceptance among investors of a certain price for a value. The route formed by these price graphs an approach which would reflect the mass psychology of the markets and can be obviously up of low, but also of lateralization, ie prices that are kept in a range for a given period. Therefore it is useful to note that these price patterns are formed, because in that intensity of movement is investor sentiment and psychology. Recall that only two variables do move the markets: fear and greed. The fear that I will show all my assets in a low and widespread panic, and ambition take me to accumulate more of these values during the climb. The fear that there will be more supply, more demand and ambition to a certain price. We must not make the mistake of noting as is often heard in the market: "There are more buyers to sellers." Every action that operates in the market is a buyer and a seller. That the transaction takes place, there must be an equal number of shares that are bought and sold. The rationale behind that assertion market is that an action is moved upward by supply and demand. To get an all you have to do is buy whatever the market offers a certain price, then buy more the next higher price than others sell. The reason is that for every action there is only a limited amount of shares for sale at a certain price. If the action is up to good news, then the barrier buyers with everything the market offers at every price, which will boost that share to increase.

Let's see how events have developed pre and post commencement of this bull rally in United States:

- Bush Jr. signed in February 2008 the first stimulus plan for U.S. $ 167,000 million to prevent the U.S. economy falls into recession, when the market was set in a downward trend since October 2007 and then took him to lose 50% of its value. Bush said "avoid recession". The market did not react to good news and deepened its decline in 2008.

- On March 10, 2009 (the postman came and saved Wall Street). It is the day of trend change in the S & P 500 came to play the minimum of 1996 points in 666 two-wheelers before. The market reacts positively to the letter from the CEO of Citigroup, Pandit Vickram.
The New York Times on March 10 said: "We hope that maybe, just maybe, the country's banks are struggling to improve, unleashed a stunning rally on Wall Street that left investors stunned a bit but has left many experts warn that this rally, like many others before, might fail as fast as it began. " The market is not ruled as quickly as it had started, and the S & P 500 gained 290 points in three months, 43%, going from 666 to 956 points. (Denial of the floor and change of trend in the negative).

-11 May: The United States corporate profits fell by 36% in the first quarter, but the encouraging news came: majority of companies in the S & P 500 reported better results than expected. 85% of companies in the S & P 500, 65% exceeded expectations. Just the bull rally and the market begins to lateralized.

-19 May: the economist Paul Krugman said output recession by August 2009. Market cap.

-8 June: Obama promises to create 600,000 jobs in a span of 100 days. There is no reaction in the market: the S & P500 level only 1% to 8.5% after a collapse.

- On June 26, 2009 Three are positive: the expense of Americans increased by 0.3% during May, and revenues by 1.4% during the same month. Revenues exceeded expectations and represented the largest increase in the last year. Also U.S. consumer confidence returned to mark a trend in June as the indicator of Reuters and the University of Michigan (70.8 points, highest level since February 2008, exceeding market expectations by 69 points). The S & P 500 rises 1% in three days and then down 6.5% so far in July. Positive news to start to go unnoticed.

Keynes said: "When the events change, I change my mind, do what you do, sir?"
Until next Friday