Last Week Market Recap

People headed for the exit sign in the stock market last week. Factors widely acknowledged throughout the rise in stock prices such as the financial excesses in private equity, sub-prime loans/housing, and the global credit boom were generally reported as responsible. With no direct catalyst for Mr. Market to pick last week to slow gains I am curious if there is any reason or logic to be learned from the timing.

Two weeks ago investors had just as much information about the economy as they do now. Timing the market is an awful game to play (there are plenty of statistics that validate this but just trust me.. ) BUT the way the market fluctuates is important for all participants to take note of. Having followed since 2004 I have begun to sense what movement is coming next. I called the downturn in the market earlier this year several days prior. (At an investment club meeting-I made no money off of my hunch, which makes it pretty worthless.)

There is no way to explain the logic and no easy way to learn this "sense". My only thought is that through a combination of checking the averages daily, regularly feeling out general investor sentiments, knowing your history, watching the charts, and staying well-read you can have a better chance of knowing when a good entry point is. I know blah, blah, blah, do this and do that but no one said that it was easy. However, this "sense" is important for index investors as well as more active investors. You can never expect to be completely right but it's worth trying. The ebb and flow of human nature is reflected in the moods, beliefs, and emotions of investors. A greater understanding of human nature can help give meaning to the movements in financial markets.