Syndicate
Opposite Direction Chain Reaction
When there is a lot of euphoria in the stock market, it tends to have inflationary effects and the bank issuing bank starts to become wiser and starts to raise the interest rates again and restrict liquidity. The na?ve ones that bought in total euphoria will still be expecting more to come, others that are more na?ve than they are to buy their stock from them at high prices. But due to the consequence of the raise in interests, the cash flow starts to become reduced and the prices of the stocks slow down the increase. Like some speculators cannot sell at higher prices, they decided to abandon the market and sell. At first they do this slowly and in small amounts. This is the first phase of the fall. Little by little bad economic news starts arriving and this comes along with a descending of the price of the stocks. The descending market rates and the bad news make people become frightened and this is how the chain reaction starts once again, only this time it is the opposite direction. The sales cause price falls and increases the sales even more, until finally this ends in such a panic that it ends up in total disbandment. This is also another phase in the over reaction of the market but the declining period is a lot shorter than the ascending. In the case of a lowering of market rates, it is the clever ones that buy the most amounts, given that they feel less affected by the panic produced by the descent and they also have money available, patience and ideas. In most of the cases where this low occurs, it is about a fall that reached an unjustified depth and which is only the fault of the hysteria of the public and the generalized sales on the part of those that posses stocks. It can also occur that the na?ve ones would have already sold it all and the stocks ended up in the hands of the clever ones right now waiting for a new cycle of increase to start up again. It seems contradictory that in the case of the raise of stock prices, the amounts of the transactions are small which indicates that the continuation of the ascending tendency, until it reaches the moment in which a general public increase occurs that runs to buy as if it were hypnotized by the stocks. It is very obviously that people react under psychological pressure. In the lowest point this is about an accumulation in the hands of the clever people, only a few. In the highest point of the market rates, this is in the hands of the na?ve people.