What Is the Real Value of a Stock?
For years now, I have been studying and analyzing world-wide stock indexes and the impacts they have on world markets and the U.S. economy. As I study world economies, I try to find anomalies and trends that are not reflected in the major indexes. The U.S. has always been a leader in the stock market index awareness and analysis due to our historically strong economic performances and the fact that we are a world financial superpower. As I study world economies, I always try to find and record any anomalies or bubbles that may develop in world stock indexes, especially the U.S. stock indexes.
Over the recent past year, I have noticed two distinct trends developing in world stock indices. First, the number of new trading volume over the last month or so in the U.S. was the lowest since the end of 2021, which happened to coincide with the beginning of the global credit crunch all over the globe. Second, there was a sudden increase in the number of charts with retracement levels, i.e., high, low, breakouts, etc., during the same period of time. Although these two trends are very subtle, they do speak volumes about the health and strength of global stock averages.
Now let’s look at the first trend. In a market dominated by exporters and traders of capital goods, stock index trading hours tend to close down around the same time. Usually, by the time most investors in the U.S. sit down for their daily work, the stock market in America has nearly closed, if not completely shut down. That phenomenon is called “the pulling of the tail”.
It is very difficult for most traders to sustain trading activity over time. In addition, it is usually hard for them to win a trade consistently. That is why most traders who trade global stock indexes prefer to use automated software programs that can track data around the clock, and then make trades for them. These programs can be set to enter and exit trades on their own. Therefore, instead of relying on technical indicators, traders can simply set the software to do the trades for them.
The second trend is what is commonly referred to as a “bear market”. Although most people think of the U.S. as a global stock averages paradise, it is true that there are many international markets that have been severely affected by the global recession and financial crisis. Canada, Europe, Japan and Australia are just some of those countries. In addition, stock markets have been severely impacted in developing countries like Brazil, India and China.
In fact, it is safe to say that no matter where you are in the world.. No matter what time of year it is, you will find investors that are speculating on whether the global stock indexes will suffer a decline or will continue to rise. The truth is, this question has been discussed by investors since before the modern financial system was invented. Traders and investors to discuss whether or not there will be a downtrend or an uptrend in the markets. The reality is, no one can predict exactly when the markets will perform, but the trend is pointing towards a downtrend.
There are two major indicators that investors look for to determine whether the markets will make a recovery or will continue to decline. These include the Stochastic and the Relative Strength Index. If the relative strength index is falling, this means that investors expect the market to fall further. On the other hand, if the Stochastic index is increasing, this means that the investors expect the market to either rise or remain flat.
As one can see, there are trends for both bullish and bearish. However, there are investors who do not care which direction the stock indexes move as long as they buy or sell stocks that fall into their own category. It may seem strange, but those who follow the markets and invest in stocks that are not within their own group are actually considered to be “indicators” of trends. This is because these investors tend to buy stocks based on their own group’s performance. They try to anticipate which direction the stocks will go so that they can gain money from it. So, what are the real value of a stock market and how does one develop an understanding of it?