In this article you will look at the market in terms of a game of cards, observing the wholesale-retail concept in the ever-recurring phases of accumulation (BUY) and distribution (SELL).
Commentary: There are basic mechanics of equal and opposite motion in the market which must be firmly understood before you commit your capital or your savings into the maelstrom of daily market 's price fluctuation.You are now to about to learn why the market , like a theater , has just so many seats and can accommodate just so many people , the rest having to sit on the floor. Everybody cannot be right and everybody cannot be wrong.
For every buyer there is a seller and for every seller there must be a buyer.It takes a pair of these opposites to make a market. This is so basic and obvious that is almost an insult to the reader's intelligence in repeating it in this article but it is essential at all times to never lose sight on this fundamental truth.
When the market is going UP rapidly it is easily forgotten during the excitement that somebody is supplying the stock. If the technical indicators are calling for a near-term decline it can be guessed that the stock suppliers on the rise comprise the "smart money" element. It is easily forgotten during a sharp decline that somebody is buying stock. If the technical indicators call for a near-term advance of considerable proportion it can be surmised that the stock buyers constitute the informed minority.
You have seen the basic theory of opposites at work in such major indicators as the short interest -SEE THE FOLLOWING Links- for more detail
I want to Invest in the Stock Market - What Is a Short Stock Interest?
I want to Invest in the Stock Market – Further Thoughts on the Short Interest
Before you take any decision keep in consideration-When the pendulum swings in one direction the mechanics calling for a an eventual reverse movement are always in play. When one goes short on a stock the trader expects it to go lower.
When too many people go short the stock or the markets can't go lower because that many people can't be right. We know that the markets' short interest as of July - 2015 is at all time high at the same level as 2008.
The short interest then is a measure of majority opinion, As majority opinion swings increasingly to the bullish side of the market(low short interest) the more bearish the actual position of the market (sharply rising short interest like in 2015) the more bullish the actual position of the market is.
The extremes indicates the major BUY and SELL points in the market trend. The theory of opposites characterizes the meaning of the odd-lot trading figures. When the public is doing the heaviest buying the technical position of the market is the weakest and when the public is selling on balance the technical position of the market is the strongest
The market just can't and will not accommodate that many people and therefore the OBVIOUS IS OBVIOUSLY WRONG.
Bottom Line: The public is always attracted to the obvious and thus the major timing errors in the market are constantly being committed by the public. You now want to divorce yourself from the public mold and look beyond the obvious, escape the majority and join the informed minority. This transition can be made easier by examining the motivations behind the molding of majority opinion , the "WHY" of it all.
Who molds majority opinion? CNBC-Cramer - Market Analyst , Bloomberg ect.
In view of the fact that the majority of people do not have the time or the aptitude to delve into all the mechanics and techniques of stock market behavior , human nature , with is natural gravity toward laziness , dictates that the task of determining what is really going on in the stock market and the economy in general at any particular time be reserved for government officials, magazine , financial web sites , editors , newspaper editors, financial writers , financial TV shows like CNBC , Mad Money from J.Cramer , Bloomberg TV and brokers .
Their pronouncements on the state of the economic , unemployment report , GDP or the condition of the stock market are generally believed and acted upon by the majority of the investing and speculating public.
These factions constitute the primary molders of majority opinion
Human Nature being what it is , the public majority is unfortunately wedded to majority opinion despite the fact that the stock market has proven such opinion wrong at the most critical times, just prior to market turns.
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