David Frankel's  Instablog

I think this a vital point to remind traders and investors. They may have every logical reason for believing that the market should be moving in a certain direction. You may have a very sound and well argued theory about why the stock you're following has to move in a certain direction

 

 A chart of Wal-Mart stock price for a year looks flat. Some excited talking head would be on a TV channel raving about Bank of America performance over the past 2 months as apposed to WMT. If you day trade, then this is all well and good. In fact I know a day trader who is not interested in the long term fundamentals or Macro Picture at all. He just wants to know can I make money today. I'm sure he's one of the people who made money on BAC when they offered more shares -initially in "after hours" trading, their share price went down. The logic being they were adding more shares and so diluting the share price which would imply a lowering of the share price.

 

 

There is a parable told of a hungry dog, that found a dry old bone. The dog eagerly started chewing the bone and in the process cuts his lip. His own blood begins to flow on to the bone. The dog redoubles his chewing efforts at the now juicy delicious bone. All the time not realizing or caring that it is his, own blood; which is making the bone seem so palatable.

In my first foray into this blogosphere, I reminded myself (not sure how many others read, let alone agreed with it), that the markets are often more influenced by emotions than facts. Today I want to go over other fundamental emotions.