So when will the market calm down? Is this a correction or the beginning of a bear market? If the economy’s so good, why is the market so bad lately?


Three very good questions that we can address by answering a single, simpler, yet deeper, question:

What makes stock prices move at all?


Answer: Human action/interaction.


That is, stock prices, like the prices of all items in an open market, move based on the pressure placed on them by buyers and sellers. When the number of buy orders for a stock exceeds its existing sell orders, the price is bid higher to the point where it inspires shareholders to sell their shares; in effect matching the buy orders at a higher price (there’s forever a seller for every buyer, and vice versa). Conversely, when the sell orders for a stock hit the market in greater quantity than existing buy orders, its price is bid lower to the point where it is deemed too good to pass up by cash-rich buyers.


Or, simply put, stock prices are governed by the law of supply (sellers) and demand (buyers).


So, again, you ask, when will the market calm down?


Answer: When conditions dictate less divergence in the opinions of existing shareholders (sellers) and willing buyers.


Again, you ask, is this a correction or the beginning of a bear market?


Answer: Depends simply on the price level at which buyers are inspired to enter the market. If they take over (greater enthusiasm than the sellers) before declines reach 20% its a correction (by definition). If sellers hold out for levels of 20% or more below the previous high we’re (by definition) talking bear market.


Note: A 20% decline that is instantly bought, producing a bounce that quickly takes prices above the previous high, is not a bear market in my book; it’s simply a deep correction. Bear markets need to last awhile… 


Again, you ask, if the economy’s so good, why is the market so bad lately?


Answer: For whatever reason(s) buyers are presently hesitant. They’re obviously waiting for clarity on one or more existing issues/headwinds. Which I touch on in the video below…

Once playing, click the icon in the lower right corner for full screen. Focus should occur after a few seconds; if not, click the wheel to the left of the YouTube icon to adjust: