Stocks go up and down based on what the MASSES think it will do. Doesn't have to be based on earnings, dividends, economy at all. There been enough studies where people throw darts at newspaper or monkeys throw darts and stocks have done well. There are more years of market going up than down, so most people are use to the market heading up, and seldom short selling especially in most retirement accounts, most options to get flat only, but big money can be had when stocks drop like a rock. I have often found it funny, people have most money in stock market at highs cause of greed, then get sizeable loss when markets plummets.
What moves stocks in the long-term?
- Thread starter zbojnik
- Start date
The question is how do you know what the MASSEES are thinking? Stock market mostly goes up because people are taking money from there paycheck and putting into stock market?(401K?)
If stock is rising, people are buying.
It's that simple. If one wants to know what traders of whatever sort are thinking, just look at what price is doing.
Though technically it's more than just buying. Every transaction involves a buyer, even when price is plummeting. Prices rise because buyers are willing and sometimes eager to pay the ask.
Ok. Then: how do you know people will continue to buy and when they will stop?
1. You don't. But you can track their buying in real time.
2. You don't. But at some point they will no longer be willing to pay the ask. This always results in a lower high. This can also be seen in real time.
But the trader has to be there to see it.
Predicting price appreciation over a long term (3 years) is all art and littlscience. If you are really interested in this, you should read the Intelligent Investor and follow investors like Warren Buffet and other Graham and Dodd style investors. It's probably the best way to successfully invest for the long term. However, it's a lot of work and takes a particular set of skills.