Quote from FerdinandAlx:
Dear Journalist,
Market direction is determined by inbalances in buying and selling. This inbalance causes prices to change in a certain direction until a balance is reached between buyers and sellers. During an inbalance the group of participants that is in the minority is able to demand price premiums from the majority. This means that if the majority is offering stocks the minority that's demanding them is able to do so at higher premiums, which in this case means lower prices. It hereby follows that stock markets are a transfer of capital from the majority to the minority in the form of price premiums. Ergo, only a minority profits.
What drives inbalances is a proces of contracting and expanding leverage. This proces has a feedback loop-like relation to sentiment: negative sentiment causes deleveraging which again causes greater negative sentiment and more deleveraging. Ultimately the use of leverage entails forced liquidation, which is the point at which the greatest price premiums can be extracted from the market place. Forced liquidation can set off a wave of more forced liquidation, causing great discrepancies in valuations from which the minority can profit.
Journalists usually lack knowledge of the rules by which markets work. This causes them to look for outside causes or rational explanations where there really are none. The way markets behave can only be fully understood by the rules upon which they are based. Ergo, how markets behave can only be understood deductively and it's possible to be understood a priori.
