Whenever stocks have a great day, investors get excited that the market is getting poised to make a good run. People with money to invest are more apt to buy stocks when they feel things are looking up than when they feel that the market may be headed down.
For the last 6 months or so, the market hasn’t gone in a clear direction. Up some days and down the others, the market hasn’t shown any indication where it is heading. One reason for this is all the uncertainty in the world and an economy that is sputtering along. Debt and unemployment worries are on everyone’s mind and this leads stocks into choppy waters.
All it takes though, is one or two strong indications out of the economy that things are looking up for investors to get excited again and start buying stocks with more conviction. Right now there are always about as many people buying stocks as there are people selling stocks and thus the reason for the market treading water. With some good economic news and some light at the end o f the tunnel visible, investors might come back to stocks with a rush.
One thing about stocks is that people never want to miss out on the good times. This means that once the market starts going back up, it may end up going too far up as everyone jumps on the bandwagon. I don’t want to call it greed but there is a part of everyone that wants to make as much as they can and not miss a good opportunity.
Before the market heads back up, any beginning investor might want to pick up a copy of a book like Stock Market For Dummies and read up on how the stock market works. It pays to understand what you are investing in and how it all works before you plop down your savings and start picking stocks.
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