Thursday, September 11, 2008

Cycle

My observation on people around me is that people are no longer talking about stocks. In fact, I seldom see my colleagues checking the stock market anymore!

Usually these are the first signs of market bottoming.

Many people are anticipating the market to come down even further. When it does, people will think that they are lucky to have avoided the market.

When there is a mini rally, people will think that it is a bear rally.

“It will fall further.”

And usually, it really does fall further.

Again, it makes people feel that they are right not to buy.

It will go up and down until a point where even the most bullish person turns bearish.

“Bear rally again.”

Finally, it will start a real rally.

Some corrections will occur to consolidate the market once in a while.

Many people will feel it is still the bear rally and avoid the market.

Then, when the market approaches to higher levels, new investors start to come in, pushing the market to an even higher level.

Before we know it, the market reaches a new high.

“It will go up further.”

And it really went up further.

Then, people started to sell and lock in profits.

The market corrects a little and goes up higher, reaching new highs.

The same people who sold start to buy again, fuelling the bubble.

Finally, the bubble bursts and we are back to the bear market, like now.

2 comments:

musicwhiz said...

Hi there,

Market Uncle's blog has a good article on the cycle of bull to bear, complete with a very hilarious diagram ! Do check out his blog (the link can be found in my blog, by the side bar).

Cheers,
Musicwhiz

Sgbluechip said...

Hi MW, thanks for the info! Just read it! It's good!