Down trading days

[Harmony Management]

Good evening,

Markets always exaggerate both on the upside and the downside. But why are the days of good decline always % higher than the day of rise? Recently, the markets were largely bullish but how long has it been since we saw a rise in the day of 3.19% equivalent to Friday's decline on the SP500?

[Jerome]

Well, quite simply because it's easy to fall quickly when you're very high, and conversely to rise very quickly when you're very low.
With markets at very high levels like we are experiencing at the moment, there are fewer and fewer new buyers and less and less cash to invest. Everyone is already in the market. The market is rising less and less quickly, it is settling down, then people start to feel nervous. There are fixed stops that are triggered, there are other smart guys who start to think that it is becoming interesting to play on the downside and the machine goes wild. All the guys who arrived last, the suckers who don't know much about the stock market, panic. They bought high, they have just lost 10% in a week and they are starting to sell at a loss. Since there are many in this situation, it creates a mass effect. And it continues until, much later, more savvy investors, opportunity seekers, arrive to buy at a good price. Then the market can start to rise again very strongly.
But you're right, markets fall much faster than they rise. Apparently man panics faster than he becomes greedy...

[DSwissK]

Or is he so greedy that he is never satisfied with what he could get by selling? 😉

[Jerome]

yes we can see that too 😉

[Author]

Posts