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There are a large number of complex and often unknown reasons that markets move up, down or sideways, but if we were to prioritize some of them as the order of importance, would this list be accurate?

1-Severe world event/news/disaster, etc.
2-Economic data (jobless claims, unemployment, Consumer Confidence, etc)
3-Trend reversals
4-Huge Volume Sells/Buys, indicating large players/institutional players.
5-Extreme Optimism/Pessimism shown by common indicators
6-Extreme Options Put/Call ratios
etc..

In short what I want to get at, is that How can we tell with a large degree of certainty that a trend is about to be reversed, Or a current blip is simply a minor pullback? Do you really trust the Candles (Daily/weekly/monthly)? or All conditions 2,3,5,6 from above have to be met? How do we distinguish between the two?

Also note mass psychology is very critical. I find the markets behave just like a single human does. Say a fight breaks out between partners, it almost never goes back to normal status quo right away and a period of healing is required. This literally applies to the markets as well. so that time-component is critical. But looking at it technically also, the crux of my question is what really determines a Trend reversal, and I think trend is most critical in markets. (note also that there's always a bias towards the upward trend, which is also shown by the historical put/call ratio.)

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  • Keep in mind that "the market" is largely irrelevant. It is like asking what ducks are quacking right now. It varies by duck, even if there is a generally increase in quackiness across the pond. – JohnFx Sep 13 '20 at 16:16
  • no - when you are mainly trading the indices, the group of ducks is all that matters. It's only the raft of ducks that matters in fact, not individuals. All those sentiments and indicators operate on the group as a whole. – Steve237 Sep 13 '20 at 19:00
  • There are dozens of reasons why stocks and markets move up or down and the importance of each is totally subjective. The simple answer is that events motivate people to buy, sell or short and a net aggregate amount of one of these moves price. No one can tell when markets will reverse or how long those reversals will last. – Bob Baerker Sep 13 '20 at 23:08
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Supply and Demand

Markets generally reflect supply and demand. It is the balance of these that determines the price of the security, and securities overall.

Causes

However a lot of the movements in the market have more mundane causes. If there has been a severe world event for example, someone who was planning to buy some stock in a particular company might hold off buying some stock that day until the impact has been understood, while someone else who is receiving a pension may need to have some securities liquidated so they can receive their pension payment. The combination of the two would result in the price of the stock going down as the securities would be being sold into a market with reduced demand.

Similarly, if the market price dropped, the collateral requirements for those trading on margin would increase. If the increase is significant, they may not be able to meet those margin requirements so would be forced to liquidate their securities (i.e. sell into a down market).

Trends can often be attributed to larger market participants wishing to buy or sell a large position in a particular company, so much that it may take a few days to accumulate the shares. This in turn can create a trend in the stock price. However nowadays most larger and more sophisticated market participants will employ algorithms to make those trends more difficult to spot. Ultimately that trend will stop once the position has been filled. If you could tell with any degree of certainty (or a more than 50% probability of certainty) you could make money trading against it... and people do, which in turn results in such events potentially going the other way.

For example, if there was an earthquake, speculators might assume that regular investors might stop putting money in the market, causing it to go down, so short the market in anticipation of that. A lot of speculators pile-on, pushing the market down to significant levels. Regular investors see the price and decide that the market is oversold, so end up buying instead pushing the price up.

Questions

would this list be accurate?

What is most important is what impacts the future dividend prospects of a company. 1 and 2 could impact those. Items 3 and above, less so.

How can we tell with a large degree of certainty that a trend is about to be reversed, Or a current blip is simply a minor pullback?

If you could tell with a sustained accuracy of more than 50% you could become very rich.

Do you really trust the Candles (Daily/weekly/monthly)? or All conditions 2,3,5,6 from above have to be met? How do we distinguish between the two?

I think a lot of retail brokers or their supporters place a lot of emphasis on indicators which is unwarranted. Daily candles will show you the range that a security typically trades each day (week or month) but won't provide any assurance about what it could look like tomorrow. They are just another way to gain some insight into what is going on in the market, but people know this so take steps to ensure that their activity doesn't impact the market, which means become invisible to most indicators people use.

If you look at the largest shareholders for a company, and the circumstances in which they might want to modify their position, it is likely that they will do so in a matter of days rather than weeks.

Verification

If you check the filings for when a large shareholder has increased or decreased a position in a given security, you should be able to see if that was consistently visible in the market data at the time.

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