Are stock markets falling because of the fundamentals or investors emotions? The one that is first to sell stocks is the small investors. You can see that if you look at the small cap index like Russel 2000. They started the downturn long time before S&P, Dow and Nasdaq.
(Picture: S&P 500 Index)
The big ones are selling later, if they are selling at all? Big investors like Buffet and Icahn are holding their positions and pick up the stocks when it drops down. So are the big hedgefunds. This is simply because they have money, time and look at the fundamentals.
Apple Inc is now trading at around $100, and Icahn said last week that the stock is worth about $200. Of course he is not selling stocks. As an activist investor, Icahn have written a letter to Apple`s CEO Tim Cook.
Icahn told him to go for buybacks. Apple will launch their new Apple Pay in a few days, and that`s probably why Icahn is so positive on that stock right now. The big player will win, and the small one with bad nerves will lose, because the small one don`t know when to jump in again.
I think that many investors don`t understand the Apple hype, but I will not be surprised it Apple beats the 51,03M bar Apple have set for itself this year. The holiday season will take the level higher.
The Dow suffered last week and Nasdaq were particularly hard hit, down 2,33% on friday. The fear Index tells us that investors are terrified at the moment. Investors didn`t like the new data from Germany and Japan, and don`t know what to do about Fed`s plans to end its stimulus and their low-interest rate policies. This is why the market is volatile right now.
Big players are looking at the fundamentals. I think they will look for the biggest companies in the U.S, and third quarter earnings reports will come from Netflix and eBay on Wednesday. Google will come with their report on thursday. In addition; Chrysler will make its debut on the New York Stock Exchange.
It is when the big players start to sell that the stock market crash, and they are not selling right now. They are waiting. Swiss adviser Marc Faber has talked about a crash for over a year now. He says that we are in a gigantic financial asset bubble. Anyway; your strategy shouldn`t be to buy on top and sell at the bottom, so be cautious.
Right now, it`s all in a green territory in Europe. Buffet is buying stocks this week, and JP Morgan is bullish and say they don`t expect the market to drop down 10%. Trade what you see, not what you think. The market is volatile and will continue to be so for a while.
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