Basic Principles Of Stock Price Forecasting

by David Jenyns on July 21, 2008

Stock prices are partly the result of facts, such as:

Stock exchange people guess at facts not yet revealed; and they form opinions on the effect of past facts, on probable future developments, and on what action other market people are going to take. A rise in the stock exchange level tends to cause stockholders and business managers, and indirectly the general public, to spend money more freely.

A drop in stock prices does the opposite. But the federal government, in the effort to avoid booms and busts, may make moves tending to contradict the stock market’s forecasts.

Published discussions of stock exchange prices usually sound as if everyone were on one side of the market. “Heavy selling lasted all day.” A sale of stock is impossible unless someone buys. If selling is heavy, then so is buying. Playing the stock exchange is a risky business, and the fact is that no one knows for sure when stocks will rise or fall.

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