Why are there so many mystery shows on TV? How many unsolved crimes shows can people watch?
A good mystery works to capture your attention. The story sparks to your imagination. Everyone wants to find out the real truth.
The stock market is a mystery to most individual investors. I have never understood why. The stock market is easy to figure out. I can make that statement because I have been watching the stock market for almost 30 years.
You just need the right perspective in order to really understand the stock market. The first thing you need to realize is what really makes stock prices move up or down.
At the current stage of this stock market cycle, every individual stock market investor who was motivated to buy stock has already bought them. The only individual investors who don’t own stocks now never felt comfortable buying stocks in the first place. Those same investors will certainly not buy stock now near all-time high price levels.
There is a limited amount of demand going forward from new individual investors to buy stocks as 2014 begins.
Eventually, new sellers of stocks will emerge. The investors who bought stocks at lower prices will want to sell them at the new higher prices. When the supply for stocks overtakes demand, stock prices will fall. At that time, it will be nearly impossible to make money in the stock market.
A lot of financial experts want to lead you to believe that the stock market is a super sophisticated universe with its own rules and hidden economic forces. It really is not. The prices of U.S. stocks follow the basic law of supply and demand.
The stock market goes up when there are more buyers than sellers of stocks. The stock market goes down when there are more sellers than buyers of stocks.
Stock market prices follow the same economic forces as every other commodity, good or service in the world. The price of everything is controlled by supply and demand.
As much as the financial news media really wants there to be, there really is no stock market mystery. The many financial experts want you to think that there is a great stock market mystery.
Just pay attention to supply and demand.
Ric Lager
Lager & Company, Inc.
