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Jeff_a_Caldwell
Senior Contributor

The Market Psychology Roller Coaster

Been doing a little thinking...On Wall Street, there's a common graphic that represents the dozen-plus stages of trading psychology or investor emotions, ranging from euphoria to depression.

 

It's like this: Starts with Optimism, then follows an S-curve, first moving higher with Enthusiasm, then Euphoria/greed. Then, the curve starts lower with Anxiety, Fear, Panic, Capitulation, then bottoms out with Depression and starts heading back higher with Hope, then returns to Optimism.

 

Though this applies to buying stocks on Wall Street, the same cycle can be observed with selling grain, I think. Looks like we're in the latter half, in the lower reaches of the cycle.

 

Here's a version of it, courtesy optionalpha.com:

 

 

So, assuming this cycle applies to the grain market, where do you think you sit right now? Have you reached the bottom of the low side -- depression -- or are you still on your way there? Feels like, in general, there's not been much to feel us pulling back higher with the Hope and Optimism quite yet. But, how far do you feel like you are, and we are as an industry?

 

Just found this really interesting and would like to "take the temperature" of the industry. Are we closer to a bounceback than we've thought for a while, based on this description of the cycle, or is it still a ways off? Or, is this all hooey to begin with?!

 

What's your view?

 

Jeff

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17 Replies
bkadds
Advisor

Re: The Market Psychology Roller Coaster

Jeff-where is the "I don't give a **bleep** anymore. Let the market do what it is going to do" phase?
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hanktbd
Senior Contributor

Re: The Market Psychology Roller Coaster

That is a part of the denial phase. However keep in mind that grain commodities have much greater supply disruptions than stock market indexes.
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Jim Meade / Iowa City
Senior Advisor

Re: The Market Psychology Roller Coaster

I wonder if this example if for investors who are not hedged?  Producers who are not hedged might find this scenario familiar, I dont' know, or maybe they understand cycles and are comfortable riding through the down side.

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BA Deere
Honored Advisor

Re: The Market Psychology Roller Coaster

In the "Bizarro World" where everything is opposite, where farmers short the market and love lower prices, the Bizarros are right now in the "thrill" part of the curve   Smiley Very Happy

 

http://en.wikipedia.org/wiki/Bizarro_World 

 

 

But in the real world, we`re unfortunately at the begining in "anxiety", not enough pain yet.   Richard Brock has a similar graph with 4 emotions with "greed" being one.... I forget the other 3 because I`m always in the greed phase   Smiley Happy

 

In my opinion emotion charts are more of an effect than a cause of the market move..or we could all just agree to start "hoping" tomorrow and get this thing turned around quickly. 

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Jim Meade / Iowa City
Senior Advisor

Re: The Market Psychology Roller Coaster

A farmer who shorts the market to offset production is a hedger and has a neutral position.  He doesn't care if the market goes up or down because his price is locked in.  His only joy is that he is not losing money - he's not making any more either.

 

Unless he shorted more than he produces, in which case the excess is speculation, and he does want to see the market go down.  I suppose there are farmers who do that  - I don't know any personally.

 

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roarintiger1
Honored Advisor

Re: The Market Psychology Roller Coaster

Just a reminder.............End users can also use this chart.    Smiley Wink

 

 

I didn't see the "glass is half full" place on the chart.    Smiley Tongue

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OKdon
Senior Contributor

Re: The Market Psychology Roller Coaster

That is the best chart I have ever seen on the marketing page, Jeff. Well done!

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Packard27
Senior Contributor

Re: The Market Psychology Roller Coaster

Here is a suggestion for all those who would invest in the stock market. [It does NOT apply to farmers who are trying to figure out what they are going to plant next spring or when and where they plan to sell their crops.]

Adopt a 15-20 year investment horizon. If you do, you will discover the market psychology curves in the above graph begin to flatten out very nicely. More importantly, you will in all likelihood also find a positive upward skew in spite of any downward gyrations that may have occurred along the journey. In words, think long term, diversify your assets, pay attention to your management fees, and lastly...believe in America.

"This old lady may have stumbled, but she ain't never fell."
Charlie Daniels
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WLH
Contributor

Re: The Market Psychology Roller Coaster

I think he wants to see how depressed we are so he can use some weird calculation to see how many will kill themselves because they can't imagine doing anything else for a living. Then he will plug that into some stupid marketing formula to play the markets and screw us all one more time!
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