Market movers

We have covered the basic causes of stock price fluctuations based on supply and demand and the firm’s perspective. Companies have a given number of shares available for trading and the price is determined depending on the quality of the business and its stocks’ current supply in relation with the current demand for it. But what would be the pivotal point to which investors’ sentiments are shifted that influences the value of a given security?

It is common to hear from a hardcore economist or investor that the equities market is an efficient market, whereas, an event that occurred moments ago has already been priced long before you hear the news whether it is good or bad. You don’t have to be a psychic to determine an ultimate target price for a group of securities you are keeping a close eye on. Trading the news is effective, but most of the time those are just small inconsistencies from an already unfolded trend that occurred way back. Jumping right in front of it could be costly; you don’t want to be standing along side a group of bulls running in different directions it’s going to be crazy out there if you would! This is what they call the noise in the market whereas when viewed at a much wider and bigger perspective it cancels the noise and all that is left is a clear trend that identifies its motives. The market also is a self winding spiral to whichever direction it is headed. It can be described as a herd which follows a general and influential direction and reverses when a single unit in the herd tries to turn around because of some unknown interruption and others followed which when seen by more members in the herd would interpret it as a change in course signal. For more about this, see Elliot Wave Theory. Putting all these together, determining the general price direction for the stocks you are keeping an eye on lies on a more general economic scale.

When a group of securities goes south or the market as a whole, there was a chain of event that went down over which if identified in a timely manner, would give you light years ahead worth of warning or notice. Knowing what caused the failure or the advance down to its very root would give you a better chance at playing “psychic” on the equities market. The word magic depends on the viewer’s perspective, magic means something that can’t be explained or outside the realms of understanding of the audience. On the master’s perspective, or the performer, it could just be merely pulling a string on something that produces the effect known to the audience as “magic”.
A new technology in the eyes of someone that had never seen it before would interpret it as magic, but as soon as the technology was revealed behind let’s say laser guided bombs, the God-like magical effect would vanish. Applying this to the market, researching down to the very root of possible causes allows you to draw a conclusion on which group of securities would be highly influenced based on the current economic standing of a country or international trade balances at a particular moment. This is like setting a spot light on an area to which the current economic condition would take its effect the most.

 

Previous | Next

Stocks | Forex | Options | Economics | Bonds | History | Language learning | Technology | Technical Analysis | Fundamental Analysis
Copyright © 2014 econtrader | Risk disclosure | Terms of Use