It’s interesting how news affects the financial markets. The negative information paired with human emotion sends the stock market frantically lower. Or how it works in reverse.
It is also interesting to watch how it creates a self fulfilling prophecy. When people hear negative news, a common thought is “My goodness, I must sell before everyone else does.”
If enough act on this, they create a chain reaction. Initial selling leads to stops getting triggered as the price moves lower, which then snowballs as more and more people get out of the market.
By thinking you need to sell before the market moves lower, you make it come true, which in turn makes the self fulfilling prophecy come true.
You can see this happen clearly on Tuesday around 12:45 when president Trump said to stop negotiations for the stimulus package until after the election.
Remembering how emotions move the market and keeping that in mind will help you make more clear trading decisions, whether you’re caught in a quick selloff or maybe you’re watching a stock that has yet to make any substantial move.
This can sound like common sense, but it’s easy to forget when trading.
And even more so if you’re the one losing money.
This is not meant to say that people should not have sold hastily.
This is to help people remember why they are doing it, and where the initial driving force behind the movement comes from.
S&P 500 (SPY) Inside day. Support 334. Resistance 343
Russell 2000 (IWM) 160 Resistance 153 Support
Dow (DIA) 277 Support. Resistance 284
Nasdaq (QQQ) 274 Support. Cleared back over 50-DMA with 282 Resistance
KRE (Regional Banks) Inside day with resistance at 40
SMH (Semiconductors) Cleared 181 needs to get over 184 Resistance next.
IYT (Transportation) 207 Pivotal
IBB (Biotechnology) 137 Support Resistance 146
XRT (Retail) Needs to clear 54. In resistance now.
Twitter: @marketminute
The author may have a position in the mentioned securities at the time of publication. Any opinions expressed herein are solely those of the author, and do not in any way represent the views or opinions of any other person or entity.
