Stocks Ready to Climb Wall of Worry – Skepticism in the strength of the broad market, geo-political tensions, and other concerns seem to be providing a wall of worry that stocks can climb as we work toward year-end. Moreover, I think the market turmoil of the past months is a shot across the bow of the Fed, warning it not to raise rates any time soon. For these reasons I doubt very much that the US stock market will drop below its August lows any time soon. By considering the above mentioned factors, I am sure that you will always be a profitable trader/investor in the market.
While picking less volatile stocks, you should try and forecast the future of the companies and get into the stock if you find it to be convincing. If the model does not adapt to current conditions, the best it can do is average over long periods which are likely not suitable for today’s market. Black box trading systems are notorious because they make money at first and then fail miserably when the market morphs into something totally different. There is a mechanism to take money out or put money into your account on a nightly basis (futures) or at expiration (options).
There are mechanisms in place, in the securities market, to prevent shorting a stock which cannot be borrowed. There are certain legal exemptions for certain market participants (market makers etc) and there is also a lack of SEC enforcement against other market participants. They can short the stock which they have not yet borrowed as long as they promise to deliver the borrowed shares in before settlement (three days).
If they create and sell enough shares they can drive the stock price down to $0 (and then they never have to buy it back !). The problem with human stock analysis is that there is so much data and so many variables that it is easy for the average human to become overwhelmed, get sucked down the rabbit hole and continue to make sub-optimal choices. Also, keep in mind, even if a stock does bounce, it could then run out of steam and drop again.
On the other hand, if it’s a car that you simply just need to have regardless of price considerations or excessively inflated bids, then discovering the total number of fungible vehicles on the market at that precise point in time may not be an important issue. So many different stock market terms, at times it can be very intimidating for some who may be just starting out.