What Is A Market And Trend Made Simple

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Here’s a revelation. There doesn’t need to be a news event or a particular cause for a market’s going higher or lower on a given day. Market participants are often so much consumed with the need to find this “reason.” We believe the market, any market really, is bigger than singular events. And yes we realize that the universe is believed to have started as a result of a singular event but we believe what we are speaking of here regarding trading markets is a completely different sphere or theme.

A case in point is an associate posing the virtually age old question “how come with bad news the market went up and with good news it went nowhere?” Our response is that it didn’t matter. A singular news event does not a market make. Nor does a single day. We have often told clients that in effect for every bull there is a bear. If there was no disputing the bullishness or bearishness of a market there would be no trading in it. There would be no interested counter parties.

The point just may be that the market itself may be all we need to determine our participation. A market only needs one buyer and one willing seller at an agreed upon price at a given time. Get a bunch of willing buyers and sellers and soon a trend may well develop. This then becomes the market. This group and the agreed upon consequential trend. What causes any singular individual to participate is that participant’s belief in whether the price will be higher or lower at some point in the future whether it is within an instant or many days, weeks or months into the future. In the case of stocks that may translate into one’s perception of what future earnings will be.

What stops the market price from continuing its trend is fewer participants perceiving that buying or selling, whichever the case, at a specific market price at a specific point will reap a future benefit. Even with which may be bullish supply and demand fundamentals for a particular market the price may reach a level where it is perceived by a growing number of this collection of market participants to fully satisfy those conditions. And yes, even before those fundamentals have physically had the chance to be completely resolved.