Saturday, October 15, 2011

Stock Market Predictions

I happened to notice this article about S&P 500 index poised to extend streak. Despite the fact that I was taught to capitalize all but the most trivial words in the title of a piece, the part that really bothers me is the confidence this person has to call next week's stock market gyrations. It begins:
With one-third of the Dow components and crowd favorite, Apple, reporting results next week, U.S. stocks are setting the stage for another week of gains.
 I'll readily admit, I have no idea which direction the S&P 500 will go next week, but I can tell you that there are 30 Dow "components" (really just a fancy name for "companies") and 500 S&P "components," which means there are precisely 470 stocks in the S&P 500 not even being considered.

But really, what are the chances that stocks will be up next week if everyone already thinks that stocks will go up? All of the "smart" money will have already bought stocks at the end of this week in anticipation of stocks going up next week--but then who does that leave to buy stocks next week? It all but guarantees that stocks will go down next week. And the more people who believe it will go up next week, the more likely the stocks will go down instead.

Apple might be a crowd favorite, but they can also disappoint. Even if earnings come in above expectations, they could still give guidance that things might be disappointing--or at least not as good as everyone hopes and expects.

Why do they stuff so much media with this crap? I'm going to go out on a limb and dare to be different. I'm calling for the stock market to be down next week--and my theory is no more than because "everyone" seems to expect it to go up next week. =) I won't sell any of the stock I have--and I'm 100% invested in stocks--because I don't think one week will make any difference at all. Even if it's down next week, it might still go up the week after that, or the week after that. And anyhow, I could be wrong. =)

But I am calling a down market next week anyhow!