Fear and Greed, which is stronger???

  • cheongwee.
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12 years 2 months ago #9019 by cheongwee.
Fear and Greed, which is stronger??? was created by cheongwee.
Greed of course, that explain why stock mkt always rise in the long term.
Now is the time to be greedy, what can be so wrong if you cover your bottom with a stop loss.
Last dec, many miss this rally, and i am bullish till end of october. Dont miss this one again, the next will be far far away.
I have bought most blues and mid cap for the ride to dow 14000 and abv..disclaimer

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12 years 2 months ago #9020 by Tactician
I'll add my 2 cents here.
I would say that both fear and greed are two sides of the same coin, and it doesn't really matter which is stronger per se. What is important is to take note that both exists at the same time, but there are times when one clearly overwhelms the other.
The fundamentals will probably drive the long term trend, and an upward trend is almost a given because of base factors such as inflation (e.g. a stock worth $1.00 should be worth $1.05 if the inflation rate is 5%, ceteris paribus). I know the example I give is very basic, but that's just to make a point... that the fundamentals will probably drive very long termĀ  trends, although one should note that fundamentals extend to beyond the financial statements of the firm. Broad influences such as rise aversion, market psychology, etc should also be taken into account.
What fear and greed does is that it creates variance, in the form of cycles, seasoning effects, exogenous shocks, etc within the long term trend.
The trend over the last few years have been somewhat down, if you compare to trends over the longer period of 10 - 20 years. That might mark a fundamental shift in investing psychology amid a climate where fear has dominated over greed.
One important consideration is the phenomena of "the reversion to the mean", where it comes to a more balanced perspective of fear and greed neutralizing. The effects is often manifested in swings and movement where technical analysis experts can classify them into various patterns of sorts... and effectively manifest itself into a "random walk" with a directional drift.
Either way, if you believe that fear has overwhelmed greed previously, and that there is now a reversion to the mean, and that the fundamentals support a rising trendline, then it might be a good time to invest. In addition, you might get spikes as technical analysts and punters/speculators get in onto the action too.
Cheers and happy hunting

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