The Psychological Aspect Of Stocks

I’m going to keep it short and sweet for today. I definitely don’t agree with how stocks have been trading. The weakness is sickening and at times it seems like there is no hope. Yes the direction of stocks is uncertain. Money is definitely not being made. It seems that people are very nervous about the economy. Housing sales this week weren’t very reassuring, but a small glimmer of hope came when jobless claims fell more than expected. I was somewhat excited when I saw the market open to the upside this morning. Once again that positive was put to rest as the sellers came in and sold off the gains they had incurred from yesterday.

You see investing at this current moment is heavily tied to the psychological aspect of trading. Panic has set in and no one wants to invest. You can see the data as many flee to the bond market investing billions over the past few months. Gold is near an all time high and statistically is higher when investors are nervous. Investors flee to the safety of gold. To me it’s just another piece of metal. Gold is an overvalued commodity that has run up over the past few years. It’s really funny to me that people put their confidence in a piece of metal.  What are you going to do with gold?  Keep it in your pocket and show it off to your friends!  It's ridiculous when you think about it. We don't barter for gold anymore.  Those days are long gone.  This isn't the Robin Hood era!

Instead of investing in gold we should be investing in ourselves. Invest money in jobs and creating value from all the intelligent people we have in the work force. The United States has great potential, but the perception of this country is bleak. Think about the fact the United States has overcome all obstacles in its path when is has come to the economy. The only way this stock market will go higher is with confidence. Without confidence Wall Street is useless. The creation of jobs will bring money back into the economy. How can you spend money to fuel the economy when you don’t have any? It’s that simple! The government needs to step up to the plate and brainstorm to create value for our workforce. People are desperate to go back to work. I’ve been unemployed and it’s a terrible feeling. My confidence was way down, but I decided to carry on and stay optimistic. I’m here to tell you that the psychological factor of this market is beating us down. It needs to change!

That being said Fed Chairman Ben Bernanke will be talking tomorrow about the future of the economy. This guy is no dummy. I believe he has what it takes to regain the confidence of the market. Traders will be waiting patiently to hear what he has to say. We need direction and Ben will give that direction with his take on the economy. Beware that the market could still drop over the next couple weeks, but a lot of the pain has already been felt. Many stocks are in oversold status. As Jim Cramer would say “Nobody every made any money panicking” Panic means someone has an opportunity to make money. It may be slow to develop, but overtime buying when everyone is selling is the best time to buy! Stay Positive!

Have a great night! In advance there is a good chance I will not be blogging on Sunday as I will drafting my team for Fantasy Football. Yes football is back for all of you NFL lovers!

Clay-

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