I have not posted anything for about a month now due to summertime activities and necessary work/research on my portfolio. Also, my education takes up a lot of time as I continue to learn as much as I can about stock investing trading systems like Growth, Value and Income methods along with how and what to watch with the economy as a whole to “indicate” future direction.
Lately I have been seeing things online from the “Experts” and a few are saying we are headed for a major crash of 50% or more. I hate these bear type doomsayers because they like to act like they have all the “data” behind their opinion and know what they are saying. Some even point to their past accurate predictions of past stock crashes. The real facts and data just get in the way for these guys. I could easily tell you today that the market is going to crash by 50% in the next 6 months. Then, 2 years later the data might support and hint to this and actually happen and I’ll say. Oh, yeah, I predicted this I saw it coming.
Just as bad on the bull side are the experts that tell you to use their investing methods to double and triple your portfolio even in down markets. They will sell you a system that any normal person is unlikely to have the stomach to follow and when everything goes south on you the expert will say that you didn’t follow the plan exactly as they sold it to you.
One major thing I’ve concluded with what my current training has convinced me of is that both camps are HOGWASH. Anyone that thinks they can predict where the market is heading by interpreting one or two “signals” or bases things on “The last time I saw this combination of events…” is full of bear or bull crap.
So here’s a few basic concepts I have adopted from my training with Investools not because they told me to but because what they are teaching is reasonable and verifiable through past performance and use of play money in a paper money platform to monitor current trades and try methods without any risk.
First and foremost is that it is not a question of if the market will go down, it’s only a question of WHEN will it go down. The reverse holds true for upward movement. This is a fact since it moves one way or the other every trading day.
Second, prices on stocks are based on one seller saying I want “$X” for my share of company YZ, or one buyer saying I will pay “$X” for your share of company YZ. It’s no more complicated than that. The complication comes into play in what motivates the buyer or seller to bid on what they are willing to pay for or accept for their shares.
What makes a seller say, I’ve had enough with this company and want out versus a buyer who thinks the seller is wrong?
What a company earns (profits) and more importantly what the company is expected to earn up to 5 or 10 years down the road is what drives the price of the stock, not past data and not current earnings. When a buyer comes in it is on the expectation that the company will do better in the future.. This concept is very important and somewhat difficult to wrap your head around. This is where past data is considered because it is what drove the engine to it’s current location. Motion tends to continue in the direction it is moving unless acted upon by another force (basic physics)
This is where current data driving the overall engine of the market comes into play because they contain forces that can change the direction of the engine on companies thus impacting future profits and drive the price up or down.
But, just as important is the companies future guidance they provide when reporting current quarterly profits. Companies provide their plans for the future and analysts consider the companies ability to deliver what they are projecting. That is the information that if positive and analysts agree is possible will drive a stocks price up and conversely down if either the companies guidance or a failure to convince the analysts.
