The market is in the HOPE stage – Soon it will enter the crash stage of DESPAIR!
When things look great, we always feel that nothing can stop or beat us. And whenever things run bad, we need to take any immediate step or drastic action. As our emotions can be the main risk to the financial health of investors, it is essential to be aware and alert of them. This awareness can protect you from the negative aspects of irrational and impulsive reactions to your emotions.
The price of the stock value and the market indices of stock like the S&P 500 and Dow 30 move via four stages and they are – 1. Optimism 2. Euphoria 3. Hope 4. Despair. All such stages can be the force on the values of stock in both terms intermediate-term frame and long term time frame.The financial press uses many exact words for explaining the overriding investor emotion as the emotion pertains to the value and movement of the stock market. You also will sense and feel the same overriding emotion as you add or subtract from the assets and capital which you allow to be risky in the stock market.
The stage of optimism is the rising prices as the new capital for putting the work by the participants of the current market along with the newly joining participants of the market. How longer this market cycle is in control of the price of the stock that is dependent on the success of the invested capital along with the positive returns on the risky capital. The time spent on creating a positive return is the second essential factor that will find out how long the stage of optimism controls the prices.
The stage of euphoric is where and when prices go to their zenith for the individual cycle. The price of parabolic raises for many numbers of stocks if not the averages are symbolic of the euphoria stage. Euphoria can be said as the false feeling and ephemeral of well-being. The best managers of funs use the euphoria stage to close the long erm held positions, rising cash in the procedure. Experienced traders do not sell short in euphoria as they are aware of the financial lethal power of the upward parabolic move in the stock price.
The stage of hope is when and where prices have stopped rising, but also have started to recede. This is the stage which needs to be understood as its power of deceiving the bulls is omnipotent is potent relative to trap bulls into the positions as soon as they go declining in its value. Hope is
the stage that provides the best time to short all stocks and those who short during this stage of hope are aware of the next stage of the cycle that is despair. The saying goes like – Hope dies in despair. In this stage, the recent crashing and depression have many similarities which will get recover also but have no idea of the period.
This is the stage of hope in the market cycle which will soon lead to the next very big crash of the Despair stage.