10. The Fourth Factor: Psychology—Greed Versus Fear
Sometimes what happens in the market just doesn’t seem to make any sense at all.
We get up in the morning to find the sun is shining. Our vacation is scheduled to start on the weekend, and we feel pretty cheerful. Not only is our own life looking good, but there seems no reason for the stock market to burst our bubble. After all, fundamental valuations are reasonable, interest rates are relatively low, all the recent indicators of economic activity signal that growth is alive and well, and momentum metrics are sending positive signals.
And then it happens. As we watch, the market indexes dip a little, just a fraction of a percentage point. But with each hour that passes, the dip becomes larger. ...
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