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----- Original Message -----
From: "John Nelson" <trader@xxxxxxxxxxxxxxx>
To: <realtraders@xxxxxxxxxxxxxxx>
Sent: Thursday, April 05, 2001 6:52 PM
Subject: RE: [RT] The Psychology Cycle
>
> Absolutely nothing...
NW: Thank you John, you have proven my point well.
By the way, have you check the stock market lately? Seems the market is up a
bunch and made a low the day the Solar activity peaked. Kewl, huh?
Cheers,
Norman
>
> -----Original Message-----
> From: Norman Winski [mailto:nwinski@xxxxxxxxxxxxxxx]
> Sent: Wednesday, April 04, 2001 8:08 PM
> To: realtraders@xxxxxxxxxxxxxxx
> Subject: Re: [RT] The Psychology Cycle
>
>
>
>
> In regard to Psychology, NOAA scientists were expecting the massive
Solar
> storm to peak yesterday while the market plunged. The radiation from this
> storm was so great,
> someone traveling in an airplane over the past few days received radiation
> equivalent to getting a full set of x-rays. It was also expected to
disrupt
> computers, electric transmission, and telecommunications. What do you
think
> a force this powerful is doing to human physiology and pschology?
>
> Radiatingly,
>
> Norman
>
> P.S. The Behavioral Finance list who purport to be pursuing scientific
> research in behavior as applied to the financial markets, kicked me off
> their list for posting scientific information such as the above NOAA
> reference. This is a good example in psychology of how difficult it is for
> most to think outside of their little "box".
>
> ----- Original Message -----
> From: "Gentle Ox" <enchant@xxxxxxxxxxxxxxxx>
> To: <realtraders@xxxxxxxxxxxxxxx>
> Sent: Wednesday, April 04, 2001 9:53 PM
> Subject: [RT] The Psychology Cycle
>
>
> > FYI...Interesting Posted on the Behavioral-Finance group and I have
> permission
> > from the author to post it here... Stephen
> >
> > The Psychology Cycle
> >
> > It has been a while since I have posted an update, but so far I have
> > not have had a compelling element to issue an update, my projections
> > regarding a further DOW slide still stands. We have had a brief rally
> > late March as the DOW attempted to cross 10000 again, but the attempt
> > failed leading yet again to another disappointment. The technology
> > warnings continues at an alarming rate with virtually all the
> > technology stars, Internet stocks, B2B stocks, networking, fiber
> > optics, semiconductors and wireless all warning.
> > The parade of warnings stands to a contrast to apparent stable shape
> > of the economy, manufacturing picked slightly and retail sales
> > holding fine, while consumer confidence revered its decline.
> > The contradiction has a simple explanation in my mind, it is Investor
> > Psychology, the market through out history has gone through
> > psychology cycles from ultimate optimism to rock bottom despair,
> > those cycles hold some connection to the economic cycle, but the
> > volatility is of such an extent that both cycles seems hardly
> > related. For example: between 1950 and 1959, the S&P500 earning
> > growth stood at 16% over that entire period, while the S&P almost
> > tripled in value*, another striking example is the fact that between
> > 1929 to 1932 the S&P index fail by 81% while real dividends fail by
> > only 11%. Also between Jan 1973 & December 1974 the S&P index fail by
> > 54% with only 6% drop in dividends during the same period*.
> > The above is just an example of how the volatility of the market can
> > go a long way regardless of the underlying fundamentals, the
> > volatility can go either way from an extreme upside like the
> > sevenfold in crease in stock prices between 1920 to 1929, compared to
> > a 3 fold increase in the S&P index earnings*.
> > At this moment in history I feel we are entering another period of
> > overreaction following a period of another opposite overreaction,
> > both periods can be regarded as an example of the psychology cycle
> > unfolding in both directions.
> > Based on a survey between I conducted between Feb 2001 to April 2001
> > of 82 investors, 90% said that they consider fundamental analysis
> > (50%) or technical analysis (40%) as the most important factor in
> > their investment decisions. Both camps stand to be disappointed if
> > the history stands as a guide, hence the market is not reacting to
> > fundamental or technical factors but rather to a prolonged form of
> > investors psychology turf that will lead to further declines as
> > investors gradually escape the carnage, while causing more carnage in
> > the process.
> > Having said that the NASDAQ seems to be approaching a bottom, the
> > NASDAQ is close to a 70% decline from its inter day high of 5132 in
> > March 2000, but the fact that we are near a bottom does not mean that
> > we will start a rebound in the near future, the market can remain
> > stuck within that range for months to come.
> > I still hold that the DOW should dip under 9000 to 8500 before we can
> > have a sustainable upside in the market.
> > It might be odd as a suggestion, but I think the best way to analyze
> > the market those days is to hire an army of psychologists specialized
> > in mass psychology, since the stock market appears to be a continues
> > real life experiment of individual behavior regarding uncertainty
> > within a group of people with similar conditions. Some might argue
> > that EMH justify the way the market does react, but many have
> > questioned the value of EMH, Robert J. Shiller book "Irrational
> > Exuberance" present some strong justifications against EMH.
> > According to an article by Pierre Belec on Reuters, Belec referred to
> > magazine covers as perhaps a good market indicator, Belec is
> > referring to a one way to measure market psychology.
> > Humans in nature are irrational agents that get carried away one way
> > or another regardless of the underlying investment fundamentals,
> > according to my survey between Feb 2001 to April 2001, out of 72
> > investors 63% reported that psychology was the reason why they lost
> > in the stock market rather then a default in their analysis.
> > It is not my intent to justify behavioral finance in this article, as
> > there are many experts much better qualified to deal with that
> > question then I do, it is my attempt is to apply the behavioral
> > concept to the market today and come out with a useful prediction to
> > where the market is heading. Fortunately, so far I have been right on
> > my analysis for the last 6 months, but I still need a longer time
> > frame to take my approach seriously. The coming few months will be
> > interesting, as the divergence between the market and the real
> > economy becomes more pronounce, the concept of a psychology cycle
> > might gain more attention.
> >
> > Nawar ALSAADI
> > 04/04/2001
> >
> > *. Figures taken from R.J Shiller book "Irrational Exuberance" 2000.
> >
> > http://www.geocities.com/Nawaralsaadi/Nawarmain.htm
> >
> >
> >
> >
> >
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> >
> >
> >
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> >
> >
>
>
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